As filed with the Securities and Exchange Commission on February 28, 1996
File No. 811-8342
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
STRATEGIC INCOME PORTFOLIO
(formerly Short-Term Income Portfolio)
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(Exact Name of Registrant as Specified in Charter)
24 Federal Street
Boston, Massachusetts 02110
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 482-8260
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H. Day Brigham, Jr.
24 Federal Street, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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EXPLANATORY NOTE
This Registration Statement, as amended, has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended. However, interests in the Registrant have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), because
such interests will be issued solely in private placement transactions
that do not involve any public offering within the meaning of Section
4(2) of the 1933 Act. Investments in the Registrant may be made only by
U.S. and foreign investment companies, common or commingled trust funds,
organizations or trusts described in Sections 401(a) or 501(a) of the
Internal Revenue Code of 1986, as amended, or similar organizations or
entities that are "accredited investors" within the meaning of Regulation
D under the 1933 Act. This Registration Statement, as amended, does not
constitute an offer to sell, or the solicitation of an offer to buy, any
interests in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to Paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant
Strategic Income Portfolio (the "Portfolio") is a
non-diversified, open-end management investment company that was organized
as a trust under the laws of the State of New York on May 1, 1992.
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may be made only by U.S. and foreign
investment companies, common or commingled trust funds, organizations or
trusts described in Sections 401(a) or 501(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under
the 1933 Act. This Registration Statement, as amended, does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security"
within the meaning of the 1933 Act.
The Portfolio's Investment Objective
The Portfolio's investment objective is to provide a high level
of income by investing in a global portfolio consisting primarily of high
grade debt securities and having a dollar weighted average maturity of not
more than three years. Maturity is measured by duration as described
below.The Portfolio's investment adviser, Boston Management and Research
("BMR" or the "Investment Adviser"), will allocate investments among
different countries, currencies and credits, including those of below
investment grade quality, based on the perception of the most favorable
markets and issuers, the relative yield and appreciation potential of a
particular country's securities, and the relationship of a country's
currency to the U.S. dollar. Changes in exchange rates for the foreign
currencies in which the investments and forward contracts are denominated
may adversely affect the value of Portfolio interests. The Portfolio's
investment objective may be changed by the Trustees of the Portfolio
without investor approval.
Additional information about the investment policies of the
Portfolio appears in Part B. The Portfolio is not intended to be a
complete investment program, and a prospective investor should take into
account its objectives and other investments when considering the purchase
of an interest in the Portfolio. The Portfolio cannot assure achievement
of its investment objective.
Investment Policies and Risks
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The Portfolio invests primarily in a portfolio of high grade debt
securities of issuers located anywhere in the world. The Investment
Adviser adjusts the Portfolio's investments and engages in active
management techniques to take advantage of differences in interest rates
and currency exchange rates in markets around the world, and other
differences among countries and markets. By allocating the Portfolio's
assets actively among issuers in different countries, and among securities
denominated in different currencies, the Investment Adviser attempts to
achieve a higher level of current income than might be available from a
portfolio invested only in the securities of one country or denominated in
one currency. This strategy requires the Investment Adviser to identify
countries and currencies where the Portfolio's investments will outperform
comparable investments in other countries and currencies and in many cases
to predict changes in economies, markets, political conditions, and other
factors. The success of this strategy will, of course, involve the risk
that the Investment Adviser's predictions may be untimely or incorrect.
The Investment Adviser also seeks to identify markets and securities which
appear to be undervalued and make investments to profit from increases in
value.
The Portfolio will invest primarily in high grade debt
securities. "High grade" debt securities include securities issued or
guaranteed as to principal or interest by the U.S. Government or any of
its agencies or instrumentalities, and debt securities, rated at least A
by Standard & Poor's Ratings Group, Moody's Investors Service, Inc., or
Duff & Phelps Inc., of foreign governmental and private issuers. They may
also include commercial paper or other short-term debt instruments rated
in one of the two highest short-term ratings by any of those rating
services (or by Fitch Investors Service, Inc.), and certificates of
deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks having total assets of more than $500 million and
determined by the Investment Adviser to be of comparable credit quality to
short-term securities with those ratings. An unrated security will be
considered to be a high grade security if the Investment Adviser
determines that it is of comparable quality to any of the securities
described above. In making such determinations, the Investment Adviser
will consider any rating of the issuer of unrated securities.
The Portfolio may invest the remainder of its assets in lower-
rated debt securities, although less than 35% of the Portfolio's assets
will be invested in securities rated below BBB-/Baa3 (commonly referred to
as "junk bonds"). Lower-rated securities generally offer higher current
yields and appreciation potential than do higher rated securities, but are
subject to greater risks. Securities in the lower-rated categories are
considered to be of poor standing and predominantly speculative;
securities in the lowest rating categories may be in default and are
generally regarded by the rating agencies as having extremely poor
prospects of ever attaining any real investment standing. The values of
lower-rated fixed-income securities generally fluctuate more than those of
higher-rated fixed-income securities. For more detailed information about
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the risks associated with investing in lower-rated securities, see
"Additional Risk and Investment Information" below.
The income producing securities in which the Portfolio invests
may have fixed, variable, or floating interest rates, constitute a broad
mix of asset classes, and may include convertible bonds, securities of
real estate investment trusts and natural resource companies, stripped
debt obligations, closed-end investment companies (that invest primarily
in debt securities in which the Portfolio could invest) preferred,
preference and convertible stocks, equipment lease certificates, equipment
trust certificates, conditional sales contracts and debt obligations
collateralized by, or representing interests in pools of, mortgages and
other types of loans ("asset-backed obligations"). The Portfolio may
invest a portion of its assets in fixed and floating rate loans and loan
interests. The Portfolio will normally invest in securities of issuers
located in at least three different countries (which may include the
United States), and will not normally invest more than 25% of its assets
in securities of issuers located in a single foreign country or
denominated in any single foreign currency, except the U.S. dollar.
Nevertheless, through "Active Management Strategies" discussed below, the
entire Portfolio may be exposed to foreign currency risks. For temporary
defensive purposes, the Portfolio may hold all or any portion of its
assets in securities of issuers located in the United States and in cash
or money market instruments. It is impossible to predict when, or for how
long, the Portfolio will engage in such strategies.
The Portfolio will maintain a dollar weighted average portfolio
maturity of not more than three years. In measuring the dollar weighted
average portfolio maturity of the Portfolio, the Portfolio will use the
concept of duration , adjusted to account for the volatility-reducing
effect of diversifying a debt portfolio among several countries. Duration
represents the dollar weighted average maturity of expected cash flows
(i.e., interest and principal payments) on one or more debt obligations,
discounted to their present values. The duration of a floating rate
security will be defined as the time to the next interest payment. The
duration of an obligation is usually less than its stated maturity and is
related to the degree of volatility in the market value of the obligation.
Maturity measures only the time until a bond or other debt security
provides its final payment; it takes no account of the pattern of a
security's payments over time. Duration takes both interest and principal
payments into account and, thus, in the Investment Adviser's opinion, is a
more accurate measure of a debt security's price sensitivity in response
to changes in interest rates. In computing the duration of its portfolio,
the Portfolio will have to estimate the duration of debt obligations that
are subject to prepayment or redemption by the issuer, based on projected
cash flows from such obligations or their relationship to comparable U.S.
Treasury securities. The Portfolio may use various techniques to shorten
or lengthen the dollar weighted average maturity of its portfolio,
including the acquisition of debt obligations at a premium or discount,
transactions in futures contracts and options on futures and interest rate
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swaps. Subject to the requirement that the dollar weighted average
portfolio maturity will not exceed three years, the Portfolio may invest
in individual debt obligations of any maturity, including obligations with
a remaining stated maturity of more than three years.
The market value of the Portfolio's investments will change in
response to changes in currency exchange and interest rates, credit
quality changes of issuers, and other factors. Changes in the values of
portfolio securities will not affect interest income derived from those
securities, but will affect the Portfolio's net asset value. See
"Additional Risk and Investment Information" below.
Active Management Techniques
Currency and Other Derivative Instruments. The Portfolio may
purchase or sell derivative instruments (which are instruments that derive
their value from another instrument, security, index, or currency) to
enhance return, to hedge against fluctuations in securities prices,
interest rates or currency exchange rates, or as a substitute for the
purchase or sale of securities or currencies. The Portfolio's
transactions in derivative instruments may be in the U.S. or abroad and
may include the purchase or sale of futures contracts on securities,
securities indices, other indices, other financial instruments or
currencies; options on futures contracts; exchange-traded and over-the-
counter options on securities, indices or currencies; and forward foreign
currency exchange contracts. The Portfolio's transactions in derivative
instruments involve a risk of loss or depreciation due to unanticipated
adverse changes in securities prices, interest rates, the other financial
instruments' prices or currency exchange rates, or the inability to close
out a position or default by the counterparty. The loss on derivative
instruments (other than purchased options) may exceed the Portfolio's
initial investment in these instruments. In addition, the Portfolio may
lose the entire premium paid for purchased options that expire before they
can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative
instruments. There can be no assurance that the Investment Adviser's use
of derivative instruments will be advantageous to the Portfolio.
To the extent that the Portfolio enters into futures contracts,
options on futures contracts and options of foreign currencies traded on
an exchange regulated by the Commodity Futures Trading Commission (the
"CFTC"), in each case that are not for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required
to establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the
Portfolio's investments, after taking into account unrealized profits and
unrealized losses on any contracts the Portfolio has entered into.
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Forward contracts are individually negotiated and privately
traded by currency traders and their customers. A forward contract
involves an obligation to purchase or sell a specific currency (or basket
of currencies) for an agreed price at a future date, which may be any
fixed number of days from the date of the contract. The Portfolio may
engage in cross-hedging by using forward contracts in one currency (or
basket of currencies) to hedge against fluctuations in the value of
securities denominated in a different currency if the Investment Adviser
determines that there is an established historical pattern or correlation
between the two currencies (or the basket of currencies and the underlying
currency). Use of a different foreign currency magnifies the Portfolio's
exposure to foreign currency exchange rate fluctuations. The Portfolio
may also use forward contracts to shift its exposure to foreign currency
exchange rate changes from one currency to another. In addition, the
Portfolio may purchase forward contracts for non-hedging purposes when the
Investment Adviser anticipates that the foreign currency will appreciate
in value.
Investment Rate and Currency Swaps. The Portfolio may enter into
interest rate and currency swaps both for hedging purposes and to enhance
return. Interest rate swaps involve the exchange by the Portfolio with
another party of their respective commitments to pay or receive interest,
e.g., an exchange of fixed rate payments for floating rate payments.
Currency swaps involve the exchange of their respective rights to make or
receive payments in specified currencies. The Portfolio will enter into
interest rate swaps on a net basis, so the risk of loss with respect to
interest rate swaps is limited to the net amount of interest payments that
the Portfolio is contractually obligated to make. If the other party to
an interest rate swap defaults, the Portfolio's risk of loss consists of
the net amount of interest payments that the Portfolio is contractually
entitled to receive. In contrast, currency swaps usually involve the
delivery of the entire payment stream in one designated currency in
exchange for the entire payment stream in the other designated currency.
Therefore, the entire principal value of a currency swap is subject to the
risk that the other party to the swap will default on its contractual
delivery obligations.
The use of interest rate and currency swaps is a highly
specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. The Investment Adviser has used interest rate and currency
swaps to only a limited extent, but has utilized other types of hedging
techniques. If the Investment Adviser is incorrect in its forecasts of
market values, interest rates and currency exchange rates, the investment
performance of an investor in the Portfolio would be less favorable than
it would have been if swaps were not used.
Securities loans, repurchase agreements, forward commitments, and
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reverse repurchase agreements. The Portfolio may lend its portfolio
securities to broker-dealers and may enter into repurchase agreements.
These transactions must be fully collateralized at all times, but involve
some risk to the Portfolio if the other party should default on its
obligations and the lender is delayed or prevented from recovering the
collateral. The Portfolio may also purchase securities for future
delivery by means of "forward commitments."
The Portfolio may also enter into "reverse" repurchase
agreements, which generally involve the sale of securities held and an
agreement to repurchase the securities at an agreed-upon price, date, and
interest payment. The Portfolio can invest the cash it receives or use it
to meet redemption requests. Reverse repurchase agreements and forward
commitments may increase the overall investment exposure of the Portfolio
and involve investment leverage. The use of investment leverage may
increase the amount of any losses incurred by the Portfolio in the case of
adverse changes in market conditions or the failure of the issuer of a
security or financial instrument to meet its obligations. The Portfolio
may also enter into reverse repurchase agreements as a hedge against a
possible decline in the value of the foreign currency in which a debt
security is denominated by converting the foreign currency cash proceeds
from the sale of the debt security into U.S. dollars.
Additional Risk and Investment Information
Investments in foreign securities. Because foreign securities
involve foreign currencies, the values of the assets of the Portfolio and
its net investment income available for distribution may be affected
favorably or unfavorably by changes in currency exchanges rates and
exchange control regulations. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and foreign
issuers are not generally subject to accounting, auditing, and financial
reporting standards and practices comparable to those in the United
States. The willingness and ability of sovereign issuers to pay principal
and interest on government securities depends on various economic factors,
including among others the issuer's balance of payments, overall debt
level, and cash flow considerations related to the availability of tax or
other revenues to satisfy the issuer's obligations. The securities of
some foreign issuers are less liquid and at times more volatile than the
securities of comparable U.S. issuers. Foreign brokerage commissions and
fees are also generally higher than in the United States. Foreign
settlement procedures and trade regulations may involve certain risks
(such as delay in the payment or delivery of securities or in the recovery
of the Portfolio's assets held abroad) and expenses not present in the
settlement of domestic investments. The Portfolio's investments may
include securities issued by lesser-developed countries, which are
sometimes referred to as "emerging markers", and issuers located in such
countries. As a result, the Portfolio may be exposed to greater risk and
will be more dependent on the Investment Adviser's ability to assess such
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risk than if the Portfolio invested solely is more developed countries.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange controls,
confiscatory taxation, political or financial instability, and diplomatic
developments which could affect the values of the Portfolio's investments
in certain foreign countries. Legal remedies available to investors in
certain foreign countries, including remedies available in bankruptcy
proceedings, may be more limited than those available with respect to
investments in the United States or in other foreign countries. The laws
of some foreign countries may limit the Portfolio's ability to invest in
securities of certain issuers located in those foreign countries. Special
tax considerations apply to foreign securities.
Investing in lower-rated securities. Lower quality debt
securities are subject to the risk of an issuer's inability to meet
principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and
general market liquidity (market risk). Lower rated and comparable
unrated securities are also more likely to react to real or perceived
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of
interest rates. The Portfolio may retain defaulted securities in its
portfolio when such retention is considered desirable by the Investment
Adviser. In the case of a defaulted security, the Portfolio may incur
additional expense seeking recovery of its investment. In the event the
rating of a security held by the Portfolio is downgraded, causing the
Portfolio to have 35% or more of its total assets in securities rated
below investment grade, the Investment Adviser will (in an orderly fashion
within a reasonable period of time) dispose of such securities as it deems
necessary in order to comply with this limitation. See the Appendix to
this Part A for the asset composition of the Portfolio for the fiscal year
ended October 31, 1995. For a description of securities ratings, see Part
B.
Interest Rate Risk. The value of an investor's interest in the
Portfolio will reflect the underlying value of the Portfolio's assets and
liabilities and will change in response to interest rate fluctuations.
When interest rates decline, the value of debt securities held by the
Portfolio can be expected to rise. Conversely, when interest rates rise,
the value of debt securities held by the Portfolio can be expected to
decline.
Other Practices. The Portfolio may at times invest in so-called
"zero-coupon" bonds (deferred interest bonds) and "payment-in-kind" bonds.
Zero-coupon bonds are issued at a significant discount from their
principal amount and interest is paid only at maturity rather than at
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intervals during the life of the security. Payment-in-kind bonds allow
the issuer, at its option, to make current interest payments on the bonds
either in cash or in additional bonds. The values of zero-coupon bonds
and payment-in-kind bonds are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest in cash
currently. Because these instruments allow an issuer to avoid the need to
generate cash to meet current interest payments, they may involve greater
credit risks than bonds paying interest currently. Even though such bonds
do not pay current interest in cash, the Portfolio is nonetheless required
to accrue interest income on such investments and an investor that is a
regulated investment company is required to distribute its share of such
amounts at least annually to its shareholders. Thus, the Portfolio could
be required at times to liquidate other investments to obtain cash in
order to satisfy an investor's distribution requirements.
The Portfolio may temporarily borrow up to 5% of the value of its
total assets to satisfy redemption requests or settle securities
transactions. Certain securities held by the Portfolio may permit the
issuer at its option to "call", or deem, its securities. If an issuer
were to redeem securities held by the Portfolio during a time of declining
interest rates, the Portfolio may not be able to reinvest the proceeds in
securities providing the same investment return as the securities
redeemed.
Non-Diversified Status. As a "non-diversified" investment
company, the Portfolio may invest, with respect to 50% of its total
assets, more than 5% (but not more than 25%) of its total assets in the
securities of any one issuer, other than U.S. government securities. The
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore,
the Portfolio is more susceptible to any single adverse or political
occurrence or development affecting issuers in which the Portfolio
invests.
Investment Restrictions. The Portfolio has adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in Part B and which may not be changed unless authorized by an
investor vote. Except for such enumerated restrictions and as otherwise
indicated in this Part A, the investment objective and policies of the
Portfolio are not fundamental policies and accordingly may be changed by
the Trustees of the Portfolio without obtaining the approval of the
investors in the Portfolio. If any changes were made in the Portfolio's
investment objective, the Portfolio might have an investment objective
different from the objective which an investor considered appropriate at
the time of the investor's initial investment in the Portfolio.
Item 5. Management of the Portfolio
The Portfolio is organized as a trust under the laws of the State
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of New York. The Portfolio intends to comply with all applicable federal
and state securities laws.
Investment Adviser. The Portfolio engages Boston Management and
Research ("BMR"), a wholly-owned subsidiary of Eaton Vance Management
("Eaton Vance"), as its investment adviser. Eaton Vance, its affiliates
and its predecessor companies have been managing assets of individuals and
institutions since 1924 and managing investment companies since 1931.
Acting under the general supervision of the Board of Trustees of
the Portfolio, BMR manages the Portfolio's investments and affairs, and
furnishes for the use of the Portfolio office space and all necessary
office facilities, equipment, and personnel for servicing the investments
of the Portfolio. Under its investment advisory agreement with the
Portfolio, BMR receives a monthly advisory fee equal to the aggregate of:
(a) a daily asset-based fee computed by applying the annual
asset rate applicable to that portion of the total daily
net assets in each Category as indicated below, plus
(b) a daily income-based fee computed by applying the daily
income rate applicable to that portion of the total daily
gross income (which portion shall bear the same
relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day)
in each Category as indicated below:
Annual Daily
Category Daily Net Assets Asset Income
Rate Rate
1 up to $500 million 0.275% 2.75%
2 $500 million but less than $1 billion 0.250% 2.50%
3 $1 billion but less than $1.5 billion 0.225% 2.25%
4 $1.5 billion but less than $2 billion 0.200% 2.00%
5 $2 billion but less than $3 billion 0.175% 1.75%
6 $3 billion and over 0.150% 1.50%
Total daily gross income is the total gross investment income, exclusive
of capital gains and losses on investments and before deduction of
expenses, earned each day by the Portfolio.
As at October 31, 1995, the Portfolio had net assets of
$152,583,289. For the fiscal year ended October 31, 1995, the Portfolio
paid BMR advisory fees equivalent to 0.55% of the Portfolio's average
daily net assets for such year.
BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with assets
under management of approximately $16 billion. Eaton Vance is a
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wholly-owned subsidiary of Eaton Vance Corp., a publicly held holding
company. Eaton Vance Corp., through its subsidiaries and affiliates,
engages in investment management and marketing activities, oil and gas
operations, real estate investment, consulting and management, and
development of precious metals properties.
Mark S. Venezia has acted as the portfolio manager of the
Portfolio since it commenced operations. He has been a Vice President of
Eaton Vance since 1987 and of BMR since 1992.
The Portfolio believes that most of the obligations which it will
acquire will normally be traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and
selling at the higher asked price of the market, and the difference is
customarily referred to as the spread. In selecting firms which will
execute portfolio transactions, BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices
which are advantageous to the Portfolio and at reasonably competitive
spreads. Subject to the foregoing, BMR may consider sales of shares of
other investment companies sponsored by BMR or Eaton Vance as a factor in
the selection of firms to execute portfolio transactions.
The Portfolio also engages BMR as its administrator under an
administration agreement. Under the administration agreement, BMR is
responsible for reviewing and supervising the provision of custody
services to the Portfolio and making related reports and recommendations
to the Board of Trustees of the Portfolio; for providing certain
valuation, legal, accounting and tax services in connection with
investments with foreign issuers or guarantors, investments denominated in
foreign currencies, and transactions in derivative instruments; and for
such other special services as the Board may direct. BMR also furnishes
the office facilities and personnel necessary for providing these
services. As compensation for these services, BMR receives a monthly
administration fee at an annual rate of 0.15% of the Portfolio's average
daily net assets. For the fiscal year ended October 31, 1995, the
Portfolio paid BMR administration fees equivalent to 0.15% of the
Portfolio's average daily net assets for such year.
The Portfolio is responsible for all of its costs and expenses
not expressly stated to be payable by BMR under the investment advisory
agreement or the administration agreement.
Item 6. Capital Stock and Other Securities
The Portfolio is organized as a trust under the laws of the State
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of New York and intends to be treated as a partnership for federal tax
purposes. Under the Declaration of Trust, the Trustees are authorized to
issue interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments
in the Portfolio may not be transferred, but an investor may withdraw all
or any portion of its investment at any time at net asset value. Investors
in the Portfolio will each be liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss
on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of any investor in the
Portfolio unless either the remaining investors, by unanimous vote at a
meeting of such investors, or a majority of the Trustees of the Portfolio,
by written instrument consented to by all investors, agree to continue the
business of the Portfolio. This provision is consistent with the treatment
of the Portfolio as a partnership for federal income tax purposes.
Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and non-assessable by the Portfolio, except as
set forth above. The Portfolio is not required and has no current
intention to hold annual meetings of investors, but the Portfolio may hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Changes in
fundamental policies or restrictions will be submitted to investors for
approval. The investment objective and all nonfundamental investment
policies of the Portfolio may be changed by the Trustees of the Portfolio
without obtaining the approval of the investors in the Portfolio.
Investors have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified
number of investors) the right to communicate with other investors in
connection with requesting a meeting of investors for the purpose of
removing one or more Trustees. Any Trustee may be removed by the
affirmative vote of holders of two-thirds of the interests in the
Portfolio.
Information regarding pooled investment entities or funds that
invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc., 24 Federal Street, Boston, MA 02110, (617) 482-8260.
Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower
returns. Additionally, the Portfolio may hold fewer securities, resulting
in increased portfolio risk, and experience decreasing economies of scale.
However, this possibility exists as well for historically structured
mutual funds which have large or institutional investors.
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As of February 14, 1996, EV Marathon Strategic Income Fund
controlled the Portfolio by virtue of owning approximately 99.9% of the
outstanding voting securities of the Portfolio.
The net asset value of the Portfolio is determined each day on
which the New York Stock Exchange (the "Exchange") is open for trading
("Portfolio Business Day"). This determination is made each Portfolio
Business Day as of the close of regular trading on the Exchange (normally
4:00 p.m., New York time) (the "Portfolio Valuation Time").
Each investor in the Portfolio may add to or reduce its
investment in the Portfolio on each Portfolio Business Day as of the
Portfolio Valuation Time. The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business
Day, which represented that investor's share of the aggregate interest in
the Portfolio on such prior day. Any additions or withdrawals for the
current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which
is the value of such investor's investment in the Portfolio as of the
Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in the Portfolio for the current
Portfolio Business Day. See Item 7 regarding the pricing of investments
in the Portfolio.
The Portfolio will allocate at least annually among its investors
its net investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. The Portfolio's net investment
income consists of all income accrued on the Portfolio's assets, less all
actual and accrued expenses of the Portfolio, determined in accordance
with generally accepted accounting principles.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any federal income tax. (See Part B, Item
20.) However, each investor in the Portfolio will take into account its
allocable share of the Portfolio's ordinary income and capital gain in
determining its federal income tax liability. The determination of each
such share will be made in accordance with the governing instruments of
the Portfolio, which are intended to comply with the requirements of the
Code and the regulations promulgated thereunder.
It is intended that the Portfolio's assets and income will be
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managed in such a way that an investor in the Portfolio that seeks to
qualify as a regulated investment company (a "RIC") under the Code will be
able to satisfy the requirements for such qualification.
Item 7. Purchase of Interests in the Portfolio
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any public offering within the meaning
of Section 4(2) of the 1933 Act. See General Description of Registrant
above.
An investment in the Portfolio will be made without a sales load.
All investments received by the Portfolio will be effected as of the next
Portfolio Valuation Time. The net asset value of the Portfolio is
determined at the Portfolio Valuation Time on each Portfolio Business Day.
The Portfolio will be closed for business and will not determine its net
asset value on the following business holidays: New Year's Day,
Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Portfolio's net asset value is computed in accordance with procedures
established by the Portfolio's Trustees.
The Portfolio's net asset value is determined by Investors Bank &
Trust Company (as custodian and agent for the Portfolio) in the manner
authorized by the Trustees of the Portfolio. The net asset value is
computed by subtracting the liabilities of the Portfolio from the value of
its total assets. Most debt securities are valued on the basis of market
valuations furnished by pricing services. For further information
regarding the valuation of the Portfolio's assets, see Part B, Item 19.
There is no minimum initial or subsequent investment in the
Portfolio. The Portfolio reserves the right to cease accepting investments
at any time or to reject any investment order.
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc. ("EVD"). The principal business address of EVD is 24
Federal Street, Boston, Massachusetts 02110. EVD receives no compensation
for serving as the placement agent for the Portfolio.
Item 8. Redemption or Decrease of Interest
An investor in the Portfolio may withdraw all of (redeem) or any
portion of (decrease) its interest in the Portfolio if a withdrawal
request in proper form is furnished by the investor to the Portfolio. All
withdrawals will be effected as of the next Portfolio Valuation Time. The
proceeds of a withdrawal will be paid by the Portfolio normally on the
Portfolio Business Day the withdrawal is effected, but in any event within
seven days. The Portfolio reserves the right to pay the proceeds of a
withdrawal (whether a redemption or decrease) by a distribution in kind of
portfolio securities (instead of cash). The securities so distributed
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would be valued at the same amount as that assigned to them in calculating
the net asset value for the interest (whether complete or partial) being
withdrawn. If an investor received a distribution in kind upon such
withdrawal, the investor could incur brokerage and other charges in
converting the securities to cash. The Portfolio has filed with the
Securities and Exchange Commission (the "SEC") a notification of election
on Form N-18F-1 committing to pay in cash all requests for withdrawals by
any investor, limited in amount with respect to such investor during any
90 day period to the lesser of (a) $250,000 or (b) 1% of the net asset
value of the Portfolio at the beginning of such period.
Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds
postponed during any period in which the Exchange is closed (other than
weekends or holidays) or trading on the Exchange is restricted or, to the
extent otherwise permitted by the Investment Company Act of 1940 (the
"1940 Act"), if an emergency exists, or during any other period permitted
by order of the SEC for the protection of investors.
Item 9. Pending Legal Proceedings
Not applicable.
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APPENDIX
Strategic Income Portfolio
Asset Composition Information
For Fiscal Year Ended October 31, 1995
Percentage of
Net Assets For
Debt Securities-- Fiscal Year Ended
Moody's Ratings October 31, 1995
Aaa 19.5%
Aa1 4.1
Aa2 34.8
Aa3 0.0
A1 2.7
A3 2.7
Ba1 3.8
Ba2 0.0
Ba3 0.5
B1 2.1
B2 20.5
B3 2.9
Baa1 0.2
Baa3 1.2
Caa 0.4
CCC 0.0
Unrated 4.6
Total 100.0%
The chart above indicates the weighted average composition for
the fiscal year ended October 31, 1995, with the debt securities rated by
Moody's Investors Service, Inc. ("Moody's") separated into the indicated
categories. The weighted averages indicated above were calculated on a
dollar weighted basis and were computed as at the end of each month during
the fiscal year. The chart does not necessarily indicate what the
composition of the Portfolio will be in the current and subsequent fiscal
years.
For a description of Moody's ratings of debt securities, see
Appendix A to Part B.
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PART B
Item 10. Cover Page
Not applicable.
Item 11. Table of Contents
Page
General Information and History B-1
Investment Objectives and Policies B-1
Management of the Portfolio B-13
Control Persons and Principal Holder of Securities B-17
Investment Advisory and Other Services B-17
Brokerage Allocation and Other Practices B-20
Capital Stock and Other Securities B-23
Purchase, Redemption and Pricing of Securities B-25
Tax Status B-25
Underwriters B-29
Calculation of Performance Data B-29
Financial Statements B-29
Appendix a-1
Item 12. General Information and History
Effective February 23, 1994, the Portfolio's name was changed
from "Short-Term Global Income Portfolio" to "Short-Term Income
Portfolio", and effective March 1, 1995, the Portfolio's name was changed
from "Short-Term Income Portfolio" to "Strategic Income Portfolio".
Item 13. Investment Objectives and Policies
Part A contains additional information about the investment
objective and policies of Strategic Income Portfolio (the "Portfolio").
This Part B should be read in conjunction with Part A. Capitalized terms
used in this Part B and not otherwise defined have the meanings given them
in Part A.
Income Producing Securities
Included in the income producing securities in which the
Portfolio may invest are preferred and preference stocks, convertible
bonds, securities of real estate investment trusts and natural resource
companies, stripped debt obligations, closed-end investment companies
(that invest primarily in debt securities in which the Portfolio could
invest), equipment lease certificates, equipment trust certificates and
conditional sales contracts. Preference stocks are stocks that have many
characteristics of preferred stocks, but are typically junior to an
existing class of preferred stocks. Securities of real estate investment
trusts, such as debentures, are affected by conditions in the real estate
industry and interest rates. Securities of natural resource companies are
subject to price fluctuation based upon inflationary pressures and demand
for natural resources. Stripped debt obligations are comprised of
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principal only or interest only obligations. The value of closed-end
investment company securities, which are generally traded on an exchange,
is affected by demand for those securities regardless of the demand for
the underlying portfolio assets. Equipment lease certificates are debt
obligations secured by leases on equipment (such as railroad cars,
airplanes or office equipment), with the issuer of the certificate being
the owner and lessor of the equipment. The issuers of equipment lease
certificates tend to be industrial, transportation and leasing companies.
Equipment trust certificates are debt obligations secured by an interest
in property (such as railroad cars or airplanes), the title of which is
held by a trustee while the property is being used by the borrower.
Conditional sales contracts are agreements under which the seller of the
property continues to hold title to the property until the purchase price
is fully paid or other conditions are met by the buyer. The Portfolio has
no current intention of investing more than 5% of its total assets in any
of these types of securities.
The Portfolio may purchase fixed-rate bonds which have a demand
feature allowing the holder to redeem the bonds at specified times. These
bonds are more defensive than conventional long-term bonds (protecting to
some degree against a rise in interest rates) while providing greater
opportunity than comparable intermediate term bonds, because the Portfolio
may retain the bond if interest rates decline. By acquiring these kinds of
bonds the Portfolio obtains the contractual right to require the issuer of
the bonds to purchase the security at an agreed upon price, which right is
contained in the obligation itself rather than in a separate agreement or
instrument. Because this right is assignable only with the bond, the
Portfolio will not assign any separate value to such right. The Portfolio
may also purchase floating or variable rate obligations and warrants when
such warrants are part of a unit with other securities.
The Portfolio's investments in high yield, high risk obligations
rated below investment grade, which have speculative characteristics, bear
special risks. They are subject to greater credit risks, including the
possibility of default or bankruptcy of the issuer. The value of such
investments may also be subject to a greater degree of volatility in
response to interest rate fluctuations, economic downturns and changes in
the financial condition of the issuer. These securities generally are less
liquid than higher quality securities. During periods of deteriorating
economic conditions and contractions in the credit markets, the ability of
such issuers to service their debt, meet projected goals or obtain
additional financing may be impaired. The Portfolio will also take such
action as it considers appropriate in the event of anticipated financial
difficulties, default or bankruptcy of either the issuer of any such
obligation or of the underlying source of funds for debt service. Such
action may include retaining the services of various persons and firms
(including affiliates of the Investment Adviser) to evaluate or protect
any real estate, facilities or other assets securing any such obligation
or acquired by the Portfolio as a result of any such event. The Portfolio
will incur additional expenditures in taking protective action with
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respect to portfolio obligations in default and assets securing such
obligations.
The Portfolio may invest in obligations of domestic and foreign
companies in the group consisting of the banking and the financial
services industries. Companies in the banking industry include U.S. and
foreign commercial banking institutions (including their parent holding
companies). Companies in the financial services industry include finance
companies, diversified financial services companies and insurance and
insurance holding companies. Companies engaged primarily in the investment
banking, securities, investment advisory or investment company business
are not deemed to be in the financial services industry for this purpose.
The securities held by the Portfolio may be affected by economic or
regulatory developments in or related to such industries. Sustained
increases in interest rates can adversely affect the availability and cost
of funds for an institution's lending activities, and a deterioration in
general economic conditions could increase the institution's exposure to
credit losses.
A bank from whom the Portfolio acquires a loan participation
interest may be treated as a co-issuer for tax diversification purposes to
the extent that the Portfolio does not have direct recourse against the
borrower of the underlying loan and is therefore relying on the credit of
such bank. For industry concentration purposes, the Investment Adviser
will consider all relevant factors in determining the issuer of a loan
interest, including: the credit quality of the borrower, the amount and
quality of the collateral, the terms of the loan agreement and the other
relevant agreements (including inter-creditor agreements), the degree to
which the credit of such interpositioned person was deemed material to the
decision to purchase the loan interest, the interest rate environment, and
general economic conditions applicable to the borrower and such
interpositioned person.
Mortgage Rolls
The Portfolio may enter into mortgage "dollar rolls" in which the
Portfolio sells mortgage-backed securities for delivery in the current
month and simultaneously contracts to repurchase substantially similar
(same type, coupon and maturity) securities on a specified future date.
During the roll period, the Portfolio foregoes principal and interest paid
on the mortgage-backed securities. The Portfolio is compensated by the
difference between the current sales price and the lower forward price for
the future purchase (often referred to as the "drop") as well as by the
interest earned on the cash proceeds of the initial sale. A "covered roll"
is a specific type of dollar roll for which there is an offsetting cash
position or a cash equivalent security position which matures on or before
the forward settlement date of the dollar roll transaction. The Portfolio
will enter into only covered rolls. Covered rolls are not treated as a
borrowing or other senior security and will be excluded from the
calculation of the Portfolio's borrowings and other senior securities.
Lending of Portfolio Securities
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The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers.
Under present regulatory policies of the Securities and Exchange
Commission ("SEC"), such loans are required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities held by
the Portfolio's custodian and maintained on a current basis at an amount
at least equal to the market value of the securities loaned, which will be
marked to market daily. Cash equivalents include certificates of deposit,
commercial paper and other short-term money market instruments. The
Portfolio would have the right to call a loan and obtain the securities
loaned at any time on up to five business days' notice.
Foreign Investments
Investing in foreign issuers involves certain special
considerations, including those set forth below, which are not typically
associated with investing in U.S. issuers. Because investments in foreign
issuers may involve currencies of foreign countries, and because the
Portfolio may temporarily hold funds in bank deposits in foreign
currencies during completion of investment programs, the Portfolio may be
affected favorably or unfavorably by changes in currency rates and in
exchange control regulations and may incur costs in connection with
conversions between various currencies.
Because foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less
publicly available information about a foreign company than about a
domestic company. Volume and liquidity in most foreign bond markets is
less than in the United States and securities of some foreign companies
are less liquid and more volatile than securities of comparable U.S.
companies. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges, although the
Portfolio endeavors to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of securities exchanges, broker-dealers and listed companies
than in the United States. Mail service between the United States and
foreign countries may be slower or less reliable than within the United
States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. The
Portfolio may be required to pay for securities before delivery. In
addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect the Portfolio's
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
Forward Foreign Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange
contracts. A forward foreign currency exchange contract involves an
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obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions
are charged at any stage for trades.
At the maturity of a forward contract the Portfolio may either
accept or make delivery of the currency specified in the contract or, at
or prior to maturity, enter into a closing purchase transaction involving
the purchase or sale of an offsetting contract. Closing purchase
transactions with respect to forward contracts are often effected with the
currency trader who is a party to the original forward contract.
The Portfolio may enter into forward foreign currency exchange
contracts in several circumstances. First, when the Portfolio enters into
a contract for the purchase or sale of a security denominated in a foreign
currency, or when the Portfolio anticipates the receipt in a foreign
currency of dividend or interest payments on such a security which it
holds, the Portfolio may desire to lock in the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying transactions, the Portfolio will
attempt to protect itself against an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.
Additionally, when management of the Portfolio believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, it may enter into a forward contract to sell, for
a fixed amount of dollars, the amount of foreign currency approximating
the value of some or all of the securities held by the Portfolio
denominated in such foreign currency. The precise matching of the forward
contract amounts and the value of the securities involved will not
generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the
value of those securities between the date on which the contract is
entered into and the date it matures. The precise projection of short-term
currency market movements is not possible, and short-term hedging provides
a means of fixing the dollar value of only a portion of the Portfolio's
foreign assets.
The Portfolio's custodian will place cash or liquid high grade
debt securities into a segregated account of the Portfolio in an amount
equal to the value of the Portfolio's total assets, reduced by the value
of any offsetting forward or written or purchased option position on the
same or a related currency, committed to the consummation of forward
foreign currency exchange contracts requiring the Portfolio to purchase
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foreign currencies or forward contracts entered into for non-hedging
purposes. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account on a
daily basis so that the value of the account will equal the amount of the
Portfolio's commitments with respect to such contracts, net of any
offsetting forward contracts or options positions.
The Portfolio generally will not enter into a forward contract
with a term of greater than one year. Using forward contracts to protect
the value of the securities held by the Portfolio against a decline in the
value of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of exchange which
the Portfolio can achieve at some future point in time.
While the Portfolio will enter into forward contracts to reduce
currency exchange rate risks, transactions in such contracts involve
certain other risks. Thus, while the Portfolio may benefit from such
transactions, unanticipated changes in currency prices may result in a
poorer overall performance for the Portfolio than if it had not engaged in
any such transactions. Moreover, there may be imperfect correlation
between the securities held by the Portfolio denominated in a particular
currency and forward contracts entered into by the Portfolio. Such
imperfect correlation may prevent the Portfolio from achieving a complete
hedge or expose the Portfolio to risk of foreign exchange loss.
Writing and Purchasing Currency Call and Put Options
The Portfolio may write covered put and call options and purchase
put and call options on foreign currencies for the purpose of protecting
against declines in the dollar value of portfolio securities and against
increases in the dollar cost of securities to be acquired. A call option
written by the Portfolio obligates the Portfolio to sell specified
currency to the holder of the option at a specified price if the option is
exercised at any time before the expiration date. A put option written by
the Portfolio would obligate the Portfolio to purchase specified currency
from the option holder at a specified price if the option is exercised at
any time before the expiration date.
A call option written by the Portfolio may be covered by
segregating assets denominated in the currency on which the call option is
written. A written call option or put option may also be covered by
maintaining cash or high grade liquid debt securities (either of which may
be denominated in any currency) in a segregated account, by entering into
an offsetting forward contract and/or by purchasing an offsetting option
or any other option on the same or a related currency and/or by purchasing
an offsetting option or any other option which, by virtue of its exercise
price or otherwise, reduces the Portfolio's net exposure on its written
option position.
The writing of currency options involves a risk that the
Portfolio will, upon exercise of the option, be required to sell currency
subject to a call at a price that is less than the currency's market value
or be required to purchase currency subject to a put at a price that
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exceeds the currency's market value.
The Portfolio may terminate its obligations under a call or put
option by purchasing an option identical to the one it has written. Such
purchases are referred to as closing purchase transactions. The
Portfolio would also be able to enter into closing sale transactions in
order to realize gains or minimize losses on options purchased by the
Portfolio.
The Portfolio would normally purchase call options in
anticipation of an increase in the dollar value of currency in which
securities to be acquired by the Portfolio are denominated. The purchase
of a call option would entitle the Portfolio, in return for the premium
paid, to purchase specified currency at a specified price during the
option period. The Portfolio would ordinarily realize a gain if, during
the option period, the value of such currency exceeded the sum of the
exercise price, the premium paid and transaction costs; otherwise the
Portfolio would realize a loss on the purchase of the call option.
The Portfolio would normally purchase put options in anticipation
of a decline in the dollar value of currency in which securities in its
portfolio ( protective puts ) are denominated. The purchase of a put
option would entitle the Portfolio, in exchange for the premium paid, to
sell specified currency at a specified price during the option period. The
purchase of protective puts is designed merely to offset or hedge against
a decline in the dollar value of the securities held by the Portfolio due
to currency exchange rate fluctuations. The Portfolio would ordinarily
realize a gain if, during the option period, the value of the underlying
currency decreased below the exercise price sufficiently to cover the
premium and transaction costs; otherwise the Portfolio would realize a
loss on the purchase of the put option. Gains and losses on the purchase
of protective put options would tend to be offset by countervailing
changes in the value of underlying currency.
Special Risks Associated With Options on Currency
An exchange traded options position may be closed out only on an
options exchange which provides a secondary market for an option of the
same series. Although the Portfolio will generally purchase or write only
those options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an exchange will
exist for any particular option, or at any particular time. For some
options no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular
options, with the result that the Portfolio would have to exercise its
options in order to realize any profit and would incur transaction costs
upon the sale of underlying securities pursuant to the exercise of put
options. If the Portfolio as a covered call option writer is unable to
effect a closing purchase transaction in a secondary market, it will not
be able to sell the underlying currency (or security denominated in that
currency) until the option expires or it delivers the underlying currency
upon exercise.
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Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the
Options Clearing Corporation (the "OCC") may not at all times be adequate
to handle current trading volume; or (vi) one or more exchanges could, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the OCC as a result of
trades on that exchange would continue to be exercisable in accordance
with their terms.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of
the facilities of the OCC inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with
the timely execution of customers' orders.
The Portfolio may purchase and write over-the-counter options to
the extent consistent with its limitation on investments in illiquid
securities, as described in Part A. Trading in over-the-counter options is
subject to the risk that the other party will be unable or unwilling to
close-out options purchased or written by the Portfolio. The staff of the
SEC takes the position that purchased over-the-counter options and assets
used to cover written over-the-counter options are illiquid securities.
However, with respect to options written with primary dealers in U.S.
Government securities or with dealers on the Federal Reserve's approved
list for foreign exchange dealers pursuant to an agreement requiring a
closing purchase transaction at a formula price, the amount of illiquid
securities may be calculated with reference to the repurchase formula.
The Portfolio intends to write covered call options on foreign
currencies. A call option written on a foreign currency by the Portfolio
is covered if the Portfolio owns the underlying foreign currency covered
by the call or has an absolute and immediate right to acquire that foreign
currency without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon
conversion or exchange of other foreign currency held in its portfolio. A
call option is also covered if the Portfolio has a call on the same
foreign currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than the exercise
price of the call written if the difference is maintained by the Portfolio
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in cash, U.S. Government securities and other high grade liquid debt
securities in a segregated account with its custodian.
The amount of the premiums which the Portfolio may pay or receive
may be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option purchasing and
writing activities.
Futures Contracts
A change in the level of currency exchange rates or interest
rates may affect the value of the Portfolio's investments (or of
investments that the Portfolio expects to make). To hedge against such
changes in rates, the Portfolio may enter into (i) futures contracts for
the purchase or sale of securities, (ii) futures contracts on securities
indices; (iii) futures contracts on other financial instruments and
indices; and (iv) futures contracts on foreign currencies. A futures
contract may generally be described as an agreement between two parties to
buy and sell particular financial instruments for an agreed price during a
designated month (or to deliver the final cash settlement price, in the
case of a contract relating to an index or otherwise not calling for
physical delivery at the end of trading in the contract). All futures
contracts entered into by the Portfolio are traded on U.S. exchanges or
boards of trade that are licensed and regulated by the Commodity Futures
Trading Commission ("CFTC") or on foreign exchanges.
Futures Contracts on Securities or Currencies. A futures
contract on a security or currency is a binding contractual commitment
which, if held to maturity, will result in an obligation to make or accept
delivery, during a particular month, of securities or currency having a
standardized face value and rate of return or currency. By purchasing
futures on securities or currency, the Portfolio will legally obligate
itself to accept delivery of the underlying security or currency and pay
the agreed price; by selling futures on securities or currency, it will
legally obligate itself to make delivery of the security or currency
against payment of the agreed price. Open futures positions on securities
or currency are valued at the most recent settlement price, unless such
price does not reflect the fair value of the contract, in which case the
positions will be valued by or under the direction of the Board of
Trustees of the Portfolio.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions which
may result in a profit or a loss. While the Portfolio's futures contracts
on securities will usually be liquidated in this manner, it may instead
make or take delivery of the underlying securities or currency whenever it
appears economically advantageous for the Portfolio to do so. A clearing
corporation associated with the exchange on which futures on securities or
currency are traded guarantees that, if still open, the sale or purchase
will be performed on the settlement date.
Futures Contracts on Securities Indices. Futures contracts on
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securities or other indices do not require the physical delivery of
securities, but merely provide for profits and losses resulting from
changes in the market value of a contract to be credited or debited at the
close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date a final cash settlement occurs
and the futures position is simply closed out. Changes in the market value
of a particular futures contract reflect changes in the level of the index
on which the futures contract is based.
Hedging Strategies. Hedging by use of futures contracts seeks to
establish with more certainty than would otherwise be possible the
effective price, rate of return or currency exchange rate on portfolio
securities or securities that the Portfolio owns or proposes to acquire.
The Portfolio may, for example, take a short position in the futures
market by selling futures contracts in order to hedge against an
anticipated rise in interest rates or a decline in market prices or
foreign currency rates that would adversely affect the dollar value of the
securities held by the Portfolio. Such futures contracts may include
contracts for the future delivery of securities held by the Portfolio or
securities with characteristics similar to those of the securities held by
the Portfolio. Similarly, the Portfolio may sell futures contracts on
currency in which its securities are denominated or in one currency to
hedge against fluctuations in the value of securities denominated in a
different currency if there is an established historical pattern of
correlation between the two currencies. If, in the opinion of the
Investment Adviser, there is a sufficient degree of correlation between
price trends for the securities held by the Portfolio and futures
contracts based on other financial instruments, securities indices or
other indices, the Portfolio may also enter into such futures contracts as
part of its hedging strategy. Although under some circumstances prices of
securities held by Portfolio may be more or less volatile than prices of
such futures contracts, the Investment Adviser will attempt to estimate
the extent of this difference in volatility based on historical patterns
and to compensate for it by having the Portfolio enter into a greater or
lesser number of futures contracts or by attempting to achieve only a
partial hedge against price changes affecting the securities held by the
Portfolio. When hedging of this character is successful, any depreciation
in the value of portfolio securities will substantially be offset by
appreciation in the value of the futures position.
On other occasions, the Portfolio may take a "long" position by
purchasing such futures contracts. This would be done, for example, when
the Portfolio anticipates the subsequent purchase of particular securities
when it has the necessary cash, but expects the prices or currency
exchange rates then available in the applicable market to be less
favorable than the prices or rates that are currently available.
Options on Futures Contracts
The Portfolio may purchase and write call and put options on
futures contracts which are traded on a United States or foreign exchange
or board of trade. An option on a futures contract gives the purchaser the
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right, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the option
period. Upon exercise of the option, the writer of the option is obligated
to convey the appropriate futures position to the holder of the option. If
an option is exercised on the last trading day before the expiration date
of the option, a cash settlement will be made in an amount equal to the
difference between the closing price of the futures contract and the
exercise price of the option.
The Portfolio may use options on futures contracts for bona fide
hedging purposes as defined below. If the Portfolio purchases a call (put)
option on a futures contract it benefits from any increase (decrease) in
the value of the futures contract, but is subject to the risk of decrease
(increase) in value of the futures contract. The benefits received are
reduced by the amount of the premium and transaction costs paid by the
Portfolio for the option. If market conditions do not favor the exercise
of the option, the Portfolio's loss is limited to the amount of such
premium and transaction costs paid by the Portfolio for the option.
If the Portfolio writes a call (put) option on a futures
contract, the Portfolio receives a premium but assumes the risk of a rise
(decline) in value in the underlying futures contract. If the option is
not exercised, the Portfolio gains the amount of the premium, which may
partially offset unfavorable changes due to interest rate or currency
exchange rate fluctuations in the value of securities held or to be
acquired for the Portfolio. If the option is exercised, the Portfolio will
incur a loss, which will be reduced by the amount of the premium it
receives. However, depending on the degree of correlation between changes
in the value of its portfolio securities (or the currency in which they
are denominated) and changes in the value of futures positions, the
Portfolio's losses from writing options on futures may be partially offset
by favorable changes in the value of portfolio securities or in the cost
of securities to be acquired.
The holder or writer of an option on a futures contract may
terminate its position by selling or purchasing an offsetting option of
the same series. There is no guarantee that such closing transactions can
be effected. The Portfolio's ability to establish and close out positions
on such options will be subject to the development and maintenance of a
liquid market.
Limitations on the Use of Futures Contracts and Options on Futures
Contracts
The Portfolio will engage in futures and related options
transactions only for bona fide hedging purposes as defined in or
permitted by CFTC regulations. The Portfolio will determine that the price
fluctuations in the futures contracts and options on futures are
substantially related to price fluctuations in securities held by the
Portfolio or which it expects to purchase. The Portfolio's futures
transactions will be entered into for traditional hedging purposes -- that
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is, futures contracts will be sold to protect against a decline in the
price of securities (or the currency in which they are denominated) that
the Portfolio owns, or futures contracts will be purchased to protect the
Portfolio against an increase in the price of securities (or the currency
in which they are denominated) it intends to purchase. As evidence of this
hedging intent, the Portfolio expects that on 75% or more of the occasions
on which it takes a "long" futures (or option) position (involving the
purchase of futures contracts), the Portfolio will have purchased, or will
be in the process of purchasing, equivalent amounts of related securities
(or assets denominated in the related currency) in the cash market at the
time when the futures (or option) position is closed out. However, in
particular cases, when it is economically advantageous for the Portfolio
to do so, a long futures position may be terminated (or an option may
expire) without the corresponding purchase of securities or other assets.
The Portfolio will engage in transactions in futures contracts and related
options only to the extent such transactions are consistent with the
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), for maintaining the qualification of each of the Portfolio's
investment company investors as a RIC for federal income tax purposes (see
"Tax Status").
The Portfolio will be required, in connection with transactions
in futures contracts and the writing of options on futures, to make margin
deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in
such futures and options transactions. Cash or liquid high grade debt
securities required to be segregated in connection with a long futures
position taken by the Portfolio will also be held by the custodian in a
segregated account and will be marked to market daily.
Interest Rate and Currency Swaps
The Portfolio will enter into interest rate swaps only on a net
basis, i.e., the two payment streams are netted out with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. In contrast, currency swaps usually involve the delivery of the
entire payment stream in one designated currency in exchange for the
entire payment stream in the other designated currency. Inasmuch as the
Portfolio maintains a segregated account with respect to all interest rate
and currency swaps, the Portfolio and the Investment Adviser believe that
such obligations do not constitute senior securities (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) and,
accordingly, will not treat them as being subject to the Portfolio's
borrowing restrictions. The net amount of the excess, if any, of the
Portfolio's obligations over its entitlements with respect to each
interest rate or currency swap will be accrued on a daily basis and an
amount of cash or liquid high grade debt securities having an aggregate
net asset value at least equal to the accrued excess will be maintained in
a segregated account by the Portfolio's custodian. The Portfolio will not
enter into any interest rate or currency swap unless the credit quality of
the unsecured senior debt or the claims-paying ability of the other party
thereto is considered to be investment grade by the Investment Adviser. If
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there is a default by the other party to such a transaction, the Portfolio
will have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with
a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid in comparison with
the markets for other similar instruments which are traded in the
interbank market.
Reverse Repurchase Agreements
The Portfolio may enter into reverse repurchase agreements. Under
a reverse repurchase agreement, the Portfolio temporarily transfers
possession of a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash. At the same time, the Portfolio agrees
to repurchase the instrument at an agreed upon time (normally within seven
days) and price, which reflects an interest payment. The Portfolio could
also enter into reverse repurchase agreements as a means of raising cash
to satisfy redemption requests without the necessity of selling portfolio
assets.
When the Portfolio enters into a reverse repurchase agreement,
any fluctuations in the market value of either the securities transferred
to another party or the securities in which the proceeds may be invested
would affect the market value of the Portfolio's assets. As a result, such
transactions may increase fluctuations in the market value of the
Portfolio's assets. While there is a risk that large fluctuations in the
market value of the Portfolio's assets could affect the Portfolio's net
asset value, this risk is not significantly increased by entering into
reverse repurchase agreements, in the opinion of the Investment Adviser.
Because reverse repurchase agreements may be considered to be the
practical equivalent of borrowing funds, they constitute a form of
leverage. If the Portfolio reinvests the proceeds of a reverse repurchase
agreement at a rate lower than the cost of the agreement, entering into
the agreement will lower the yield of an investor in the Portfolio. While
the Investment Adviser does not consider reverse repurchase agreements to
involve a traditional borrowing of money, reverse repurchase agreements
will be included within "borrowings" contained in the Portfolio's
investment restriction (2) set forth below.
At all times that a reverse repurchase agreement for borrowing
purposes is outstanding, the Portfolio will maintain cash or high grade
liquid securities in a segregated account at its custodian bank with a
value at least equal to its obligation under the agreement. Securities and
other assets held in the segregated account may not be sold while the
reverse repurchase agreement is outstanding, unless other suitable assets
are substituted. To the extent that the Portfolio enters into reverse
repurchase agreements for hedging purposes as described in Part A, the
Portfolio will not be required to maintain the segregated account
described above.
Portfolio Turnover
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The Portfolio cannot accurately predict its portfolio turnover
rate, but it is anticipated that the annual turnover rate will generally
not exceed 100% (excluding turnover of securities having a maturity of one
year or less). A 100% annual turnover rate would occur, for example, if
all the securities held by the Portfolio were replaced in a period of one
year. A high turnover rate (such as 100% or more) necessarily involves
greater expenses to the Portfolio and may result in the realization of
substantial net short-term capital gains. The Portfolio may engage in
active short-term trading to benefit from yield disparities among
different issues of securities or among the markets for fixed income
securities of different countries, to seek short-term profits during
periods of fluctuating interest rates, or for other reasons. Such trading
will increase the Portfolio's rate of turnover and may increase the
incidence of net short-term capital gains allocated to investors in the
Portfolio.
Investment Restrictions
The Portfolio has adopted the following investment restrictions,
which may not be changed without the approval of the holders of a
majority of the outstanding voting securities of the Portfolio, which as
used in this Part B means the lesser of (a) 67% or more of the outstanding
voting securities of the Portfolio present or represented by proxy at a
meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or
(b) more than 50% of the outstanding voting securities of the Portfolio.
The term "voting securities" as used in this paragraph has the same
meaning as in the 1940 Act. The Portfolio may not:
(1) Purchase any security (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if such purchase, at the time thereof, would cause 25%
or more of the Portfolio's total assets (taken at market value) to be
invested in the securities of issuers in any single industry; provided,
that the electric, gas and telephone utility industries shall be treated
as separate industries for purposes of this restriction;
(2) Borrow money or issue senior securities except as permitted
by the Investment Company Act of 1940;
(3) Purchase securities on margin (but the Portfolio may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities). The deposit or payment by the Portfolio of
initial, maintenance or variation margin in connection with all types of
options and futures contract transactions is not considered the purchase
of a security on margin;
(4) Underwrite or participate in the marketing of securities of
others, except insofar as it may technically be deemed to be an
underwriter in selling a portfolio security under circumstances which may
require the registration of the same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and
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<PAGE>
sell securities which are secured by real estate and securities of
companies which invest or deal in real estate;
(6) Purchase or sell physical commodities or futures contracts
for the purchase or sale of physical commodities; provided, that the
Portfolio may enter into all types of futures and forward contracts on
currency, securities and securities, economic and other indices and may
purchase and sell options on such futures contracts; or
(7) Make loans to any person, except by (a) the acquisition of
debt instruments and making portfolio investments, (b) entering into
repurchase agreements, and (c) lending portfolio securities.
The Portfolio has adopted the following investment policies,
which may be changed by the Trustees of the Portfolio without the approval
of the Portfolio's investors. As a matter of nonfundamental policy, the
Portfolio may not: (a) invest more than 15% of its net assets in
investments which are not readily marketable, including restricted
securities and repurchase agreements with a maturity longer than seven
days. Restricted securities for the purposes of this limitation do not
include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees, or its delegate, determines
to be liquid; (b) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short,
and unless no more than 25% of its net assets (taken at current value) is
held as collateral for such sales at any one time. (It is the present
intention of management to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes);
(c) purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Portfolio or is a member, officer, director or
trustee of any investment adviser of the Portfolio, if after the purchase
of the securities of such issuer by the Portfolio one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or securities
or both (all taken at market value) of such issuer and such persons owning
more than 1/2 of 1% of such shares or securities together own beneficially
more than 5% of such shares or securities or both (all taken at market
value); (d) purchase oil, gas or other mineral leases or purchase
partnership interests in oil, gas or other mineral exploration or
development programs; (e) invest more than 5% of its total assets (taken
at current value) in the securities of issuers which, including their
predecessors, have been in operation for less than three years; (f)
purchase put or call options on securities if after such purchase more
than 5% of its net assets, as measured by the aggregate of the premiums
paid for such options, would be invested in such options; and (g) purchase
warrants with a value in excess of 5% of its net assets, or warrants which
are not listed on the New York or American Stock Exchange with a value in
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excess of 2% of its net assets. The Portfolio has no current intention
during the current year of engaging in short sales.
In order to permit the sale in certain states of shares of
certain open-end investment companies which are investors in the
Portfolio, the Portfolio may make commitments more restrictive than the
policies described above. Should the Portfolio determine that any such
commitment is no longer in the best interests of the Portfolio and its
investors, it will revoke such commitment.
Item 14. Management of the Portfolio
The Trustees and officers of the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise
noted, the business address of each Trustee and officer is 24 Federal
Street, Boston, Massachusetts 02110, which is also the address of the
Portfolio's investment adviser, Boston Management and Research ("BMR" or
the "Investment Adviser"), which is a wholly-owned subsidiary of Eaton
Vance Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC.
Those Trustees who are "interested persons" of the Portfolio, BMR, Eaton
Vance, EVC or EV, as defined in the 1940 Act, by virtue of their
affiliation with any one or more of the Portfolio, BMR, Eaton Vance, EVC
or EV, are indicated by an asterisk(*).
TRUSTEES OF THE PORTFOLIO
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and
communications company) founded in 1988; Chairman of the Board of
Newspapers of New England, Inc. since 1983. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (54), President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director
of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff Professor of Investment Banking at Harvard University
Graduate School of Business Administration. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134
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<PAGE>
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding
company owning institutional investment management firms. Chairman,
President and Director, UAM Funds (mutual funds). Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE PORTFOLIO
MARK VENEZIA (46), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (50), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (64), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (60), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor,
The Boston Company (1991-1993) and Registration Specialist, Fidelity
Management & Research Co. (1986-1991). Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Murphy was elected Assistant
Secretary of the Portfolio on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
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Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Officer
of various investment companies managed by Eaton Vance or BMR. Mr.
Woodbury was elected Assistant Secretary of the Portfolio on June 19,
1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the
Special Committee of the Board of Trustees. The Special Committee's
functions include a continuous review of the Portfolio's contractual
relationship with the Investment Adviser, making recommendations to the
Trustees regarding the compensation of those Trustees who are not members
of the Eaton Vance organization, and making recommendations to the
Trustees regarding candidates to fill vacancies, as and when they occur,
in the ranks of those Trustees who are not interested persons of the
Portfolio or the Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit
Committee of the Board of Trustees. The Audit Committee's functions
include making recommendations to the Trustees regarding the selection of
the independent accountants, and reviewing with such accountants and the
Treasurer of the Portfolio matters relative to accounting and auditing
practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian of the Portfolio.
The fees and expenses of those Trustees of the Portfolio who are
not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Portfolio. (The Trustees of the Portfolio who are members
of the Eaton Vance organization receive no compensation from the
Portfolio). During the fiscal year ended October 31, 1995, the
noninterested Trustees of the Portfolio received the following
compensation in their capacities as Trustees of the Portfolio, and, during
the year ended December 31, 1995, earned the following compensation in
their capacities as Trustees of the funds in the Eaton Vance fund
complex(1):
Aggregate Total Compensation
Compensation from Portfolio
Name from Portfolio and Fund Complex
---- -------------- -----------------
Donald R.
Dwight $2,274(2) $135,000(4)
Samuel L.
Hayes, III 2,298(3) 150,000(5)
Norton H.
Reamer 2,300 135,000
John L.
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<PAGE>
Thorndike 2,397 140,000
Jack L.
Treynor 2,383 140,000
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $761 of deferred compensation.
(3) Includes $806 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
Trustees of the Portfolio who are not affiliated with BMR may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his
deferred fees invested by the Portfolio in the shares of one or more funds
in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will
have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular
level of compensation to the Trustee. The Portfolio does not have a
retirement plan for its Trustees.
The Portfolio's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved
because of their offices with the Portfolio, unless, as to liability to
the Portfolio or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect
to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Portfolio. In the case of settlement, such
indemnification will not be provided unless it has been determined by a
court or other body approving the settlement or other disposition, or by a
reasonable determination, based upon a review of readily available facts,
by vote of a majority of noninterested Trustees or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
wilful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
Item 15. Control Persons and Principal Holder of Securities
As of February 14, 1996, EV Marathon Strategic Income Fund (the
"Marathon Fund") controlled the Portfolio by virtue of owning
approximately 99.9% of the value of the outstanding interests in the
Portfolio. Because the Marathon Fund controls the Portfolio, the Marathon
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Fund may take actions without the approval of any other investor. The
Marathon Fund has informed the Portfolio that whenever it is requested to
vote on matters pertaining to the fundamental policies of the Portfolio,
it will hold a meeting of shareholders and will cast its vote as
instructed by its shareholders. It is anticipated that any other investor
in the Portfolio which is an investment company registered under the 1940
Act would follow the same or a similar practice. The Marathon Fund is a
series of Eaton Vance Mutual Funds Trust, an open-end management
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts.
Item 16. Investment Advisory and Other Services
Investment Adviser. The Portfolio engages BMR as its investment
adviser pursuant to an Investment Advisory Agreement dated March 1, 1994.
BMR or Eaton Vance acts as investment adviser to investment companies and
various individual and institutional clients with combined assets under
management of approximately $16 billion.
BMR manages the investments and affairs of the Portfolio subject
to the supervision of the Portfolio's Board of Trustees. BMR furnishes to
the Portfolio investment research, advice and supervision, furnishes an
investment program and will determine what securities will be purchased,
held or sold by the Portfolio and what portion, if any, of the Portfolio's
assets will be held uninvested. The Investment Advisory Agreement requires
BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities. The
Portfolio is responsible for all expenses not expressly stated to be
payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and
continuing its existence, (ii) registration of the Portfolio under the
1940 Act, (iii) commissions, fees and other expenses connected with the
acquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of
interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or
other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering
and maintaining registrations of the Portfolio and of the Portfolio's
placement agent as broker-dealer or agent under state securities laws,
(ix) expenses of reports and notices to investors and of meetings of
investors and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping for funds, securities and other
investments, keeping of books, accounts and records, and determination of
net asset values, book capital account balances and tax capital account
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balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for
all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees
of the Portfolio, (xvii) compensation and expenses of Trustees of the
Portfolio who are not members of the BMR organization, and (xvii) such
non-recurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the obligation of
the Portfolio to indemnify its Trustees, officers and investors with
respect thereto.
For a description of the compensation that the Portfolio pays BMR
under the Investment Advisory Agreement, see "Management of the Portfolio"
in Part A. As at October 31, 1995, the Portfolio had net assets of
$152,583,289. For the fiscal year ended October 31, 1995, the Portfolio
paid BMR advisory fees of $992,620 (equivalent to 0.55% of the Portfolio's
average daily net assets for such year). For the period from the start of
business, March 1, 1994, to October 31, 1994, the Portfolio paid BMR
advisory fees of $1,004,670 (equivalent to 0.49% (annualized) of the
Portfolio's average daily net assets for such period).
The Investment Advisory Agreement with BMR remains in effect until
February 28, 1997. It may be continued indefinitely thereafter so long as
such continuance after February 28, 1997 is approved at least annually (i)
by the vote of a majority of the Trustees of the Portfolio who are not
interested persons of the Portfolio or of the Investment Adviser cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Portfolio or by vote of
a majority of the outstanding voting securities of the Portfolio. The
Agreement may be terminated at any time without penalty on sixty (60)
days' written notice by the Board of Trustees of either party, or by vote
of the majority of the outstanding voting securities of the Portfolio, and
the Agreement will terminate automatically in the event of its assignment.
The Agreement provides that the Investment Adviser may render services to
others and engage in other business activities and may permit other fund
clients and other corporations and organizations to use the words Eaton
Vance or Boston Management and Research in their names. The Agreement
also provides that the Investment Adviser shall not be liable for any loss
incurred in connection with the performance of its duties, or action taken
or omitted under that Agreement, in the absence of willful misfeasance,
bad faith, gross negligence in the performance of its duties or by reason
of its reckless disregard of its obligations and duties thereunder, or for
any losses sustained in the acquisition, holding or disposition of any
security or other investment.
The Portfolio has also engaged BMR to act as its Administrator
under an Administration Agreement. The Administration Agreement with BMR
remains in effect until February 28, 1997 and shall continue in full force
and effect indefinitely thereafter, but only so long as such continuance
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is approved at least annually (i) by the Trustees of the Portfolio and
(ii) by the vote of a majority of those Trustees of the Portfolio who are
not interested persons of the Portfolio or of the Administrator. Under
the Administration Agreement, BMR is obligated to (a) review and supervise
the provision of all domestic and foreign custodial services to the
Portfolio, and to make such reports and recommendations to the Board of
Trustees of the Portfolio concerning the provision of such services as the
Board deems appropriate; (b) provide to the Portfolio certain valuation,
legal, accounting and tax assistance and services in connection with the
Portfolio's (i) investments in (A) securities, obligations and commercial
paper that are denominated in foreign currencies or the European Currency
Unit ("ECU"), or that are issued or guaranteed by foreign entities, (B)
certificates of deposit and bankers' acceptances issued or guaranteed by,
or time deposits maintained at, foreign banks or foreign branches of U.S.
banks, and (C) participation interests in loans by U.S. or foreign banks
that are made to foreign borrowers or that are denominated in foreign
currencies or the ECU; and (ii) transactions in derivative instruments,
including instruments indexed to foreign exchange rates, forward foreign
currency exchange contracts, put and call options on foreign currencies,
futures contracts and options on such contracts, and interest rate and
currency swaps; and (c) provide to the Portfolio such other special
administrative services as the Board from time to time shall instruct BMR
to furnish under the Administration Agreement. In return for these
special services, the Portfolio pays BMR as compensation under the
Administration Agreement a monthly fee in the amount of .0125% (equivalent
to .15% annually) of the average daily net assets of the Portfolio. For
the fiscal year ended October 31, 1995, the Portfolio paid BMR
administration fees of $273,545. For the period from the start of
business, March 1, 1994, to October 31, 1994, the Portfolio paid BMR
administration fees of $284,828.
The Portfolio will be responsible for all costs and expenses not
expressly stated to be payable by BMR under the Administration Agreement.
Such costs and expenses to be borne by the Portfolio include, without
limitation, the fees and expenses of the Portfolio's custodian and
transfer agent, including those incurred for determining the Portfolio's
net asset value and keeping the Portfolio's books; expenses of pricing and
valuation services; membership dues in investment company organizations;
brokerage commissions and fees; registration of the Portfolio under the
1940 Act; expenses of reports to investors, proxy statements, and other
expenses of investor's meetings; insurance premiums; printing and mailing
expenses; interest, taxes and governmental fees; legal and accounting
expenses; compensation and expenses of Trustees not affiliated with BMR;
and investment advisory and administration fees. The Portfolio will also
bear expenses incurred in connection with litigation in which the
Portfolio is a party and the legal obligation the Portfolio may have to
indemnify its officers and Trustees with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and
EV are both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
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Massachusetts business trusts, and EV is the trustee of BMR and Eaton
Vance. The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M.
Dozier Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors
of EVC consist of the same persons and John G.L. Cabot and Ralph Z.
Sorenson. Mr. Clay is chairman and Mr. Gardner is president and chief
executive officer of EVC, BMR, Eaton Vance and EV. All of the issued and
outstanding shares of Eaton Vance and EV are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares
of the outstanding Voting Common Stock of EVC are deposited in a Voting
Trust which expires on December 31, 1996, the Voting Trustees of which are
Messrs. Clay, Brigham, Gardner, Hawkes and Rowland. The Voting Trustees
have unrestricted voting rights for the election of Directors of EVC. All
of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers and Directors of EVC and EV. As of January 31, 1996, Messrs.
Clay, Gardner and Hawkes each owned 24% of such voting trust receipts, and
Messrs. Rowland and Brigham owned 15% and 13%, respectively, of such
voting trust receipts. Messrs. Hawkes and Otis are officers or Trustees of
the Portfolio and are members of the EVC, BMR, Eaton Vance and EV
organizations. Messrs. Murphy, O'Connor, Woodbury and Venezia and Ms.
Sanders are officers of the Portfolio and are members of the BMR, Eaton
Vance and EV organizations. BMR will receive the fees paid under the
Investment Advisory Agreement and Administration Agreement.
Eaton Vance owns all of the stock of Energex Energy Corporation,
which is engaged in oil and gas operations. In addition, Eaton Vance owns
all of the stock of Northeast Properties, Inc., which is engaged in real
estate investment, consulting and management. EVC owns all of the stock
of Fulcrum Management, Inc. and MinVen Inc., which are engaged in the
development of precious metal properties. EVC also owns 24% of the Class
A shares of Lloyd George Management (B.V.I.) Limited, a registered
investment adviser. EVC, BMR, Eaton Vance and EV may also enter into
other businesses.
EVC and its affiliates and their officers and employees from time
to time have transactions with various banks, including the custodian of
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not
be influenced by existing or potential custodial or other relationships
between the Portfolio and such banks.
Custodian. Investors Bank & Trust Company ( IBT ), 89 South
Street, Boston, Massachusetts, acts as custodian for the Portfolio. IBT
has the custody of all of the Portfolio's assets, maintains the general
ledger of the Portfolio, and computes the daily net asset value of
interests in the Portfolio. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other
dealings with the Portfolio's investments, receives and disburses all
funds and performs various other ministerial duties upon receipt of proper
instructions from the Portfolio. IBT charges custody fees which are
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competitive within the industry. The fees for the Portfolio relate to (1)
bookkeeping and valuation services provided at an annual rate, (2)
activity charges based upon the volume of investment related transactions,
and (3) reimbursement of out-of-pocket expenses. These fees are then
reduced by a credit for cash balances of the Portfolio at the custodian
equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied to the
Portfolio's average daily collected balances. Landon T. Clay, a Director
of EVC and an officer, Trustee or Director of other entities in the Eaton
Vance organization, owns approximately 13% of the voting stock of
Investors Financial Services Corp., the holding company parent of IBT.
Management believes that such ownership does not create an affiliated
person relationship between the Portfolio and IBT under the 1940 Act. For
the fiscal year ended October 31, 1995, the Portfolio paid IBT $134,894
for its services as custodian.
Independent Accountants. Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts 02109, are the independent
accountants for the Portfolio, providing audit services, tax return
preparation, and assistance and consultation with respect to the
preparation of filings with the SEC.
Item 17. Brokerage Allocation and Other Practices
Decisions concerning the execution of portfolio security
transactions, including the selection of the market and the executing
firm, are made by BMR. BMR is also responsible for the execution of
transactions for all other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio
and of all other accounts managed by it for execution with many firms. BMR
uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to the Portfolio and at
reasonably competitive spreads or (when a disclosed commission is being
charged) at reasonably competitive commission rates. In seeking such
execution, BMR will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the
general execution and operational capabilities of the executing firm, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction,
the reputation, reliability, experience and financial condition of the
firm, the value and quality of the services rendered by the firm in this
and other transactions, and the reasonableness of the spread or
commission, if any. The debt securities and obligations purchased and
sold by the Portfolio are generally traded in the domestic or foreign
over-the-counter markets on a net basis (i.e., without commission) through
broker-dealers and banks acting for their own account rather than as
brokers, or otherwise involve transactions directly with the issuer of
such obligations. Such firms attempt to profit from such transactions by
buying at the bid price and selling at the higher asked price of the
market for such obligations, and the difference between the bid and asked
prices is customarily referred to as the spread. The Portfolio may also
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purchase debt securities from domestic and foreign underwriters, the cost
of which may include undisclosed fees and concessions to the underwriters.
Transactions in foreign obligations usually involve the payment of fixed
brokerage commissions when executed on foreign securities exchanges, which
commissions are generally higher than those in the United States.
Although commissions on portfolio security transactions will, in the
judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may
be paid to firms who were selected to execute transactions on behalf of
the Portfolio and BMR's other clients for providing brokerage and research
services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of
1934, a broker or dealer who executes a portfolio transaction on behalf of
the Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made either on the basis of that
particular transaction or on the basis of overall responsibilities which
BMR and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, BMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include
advice as to the value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement); and the Research Services referred to in the
next paragraph.
It is a common practice of the investment advisory industry and of
the advisers of investment companies, institutions and other investors to
receive research, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in
the performance of their investment responsibilities ( Research Services )
from broker-dealer firms which execute portfolio transactions for the
clients of such advisers and from third parties with which such
broker-dealers have arrangements. Consistent with this practice, BMR
receives Research Services from many broker-dealer firms with which BMR
places the Portfolio's transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and
transactions and recommendations as to the purchase and sale of securities
and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software,
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data bases and services. Any particular Research Service obtained through
a broker-dealer may be used by BMR in connection with client accounts
other than those accounts which pay commissions to such broker-dealer. Any
such Research Service may be broadly useful and of value to BMR in
rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by
the Portfolio is not reduced because BMR receives such Research Services.
BMR evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research
Services which BMR believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to
seek to execute portfolio security transactions at advantageous prices and
at reasonably competitive spreads or commission rates, BMR is authorized
to consider as a factor in the selection of any firm with whom portfolio
orders may be placed the fact that such firm has sold or is selling
securities of other investment companies sponsored by BMR or Eaton Vance.
This policy is not inconsistent with a rule of the National Association of
Securities Dealers, Inc., which rule provides that no firm which is a
member of the Association shall favor or disfavor the distribution of
shares of any particular investment company or group of investment
companies on the basis of brokerage commissions received or expected by
such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its
affiliates. BMR will attempt to allocate equitably portfolio security
transactions among the Portfolio and the portfolios of its other
investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and
such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the
Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such
accounts. While this procedure could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Portfolio that the benefits
available from the BMR organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.
For the fiscal year ended October 31, 1995, the Portfolio paid
brokerage commissions of $11,700 with respect to portfolio transactions.
Of this amount, approximately $11,357 was paid in respect of portfolio
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security transactions aggregating approximately $148,774,532 to firms that
provided some Research Services to the BMR organization. For the period
from the start of business, March 1, 1994, to October 31, 1994, the
Portfolio paid foreign brokerage commissions on its portfolio security
transactions amounting to $6,875.
Item 18. Capital Stock and Other Securities
Under the Portfolio's Declaration of Trust, the Trustees are
authorized to issue interests in the Portfolio. Investors are entitled to
participate pro rata in distributions of taxable income, loss, gain and
credit of the Portfolio. Upon dissolution of the Portfolio, the Trustees
shall liquidate the assets of the Portfolio and apply and distribute the
proceeds thereof as follows: (a) first, to the payment of all debts and
obligations of the Portfolio to third parties including, without
limitation, the retirement of outstanding debt, including any debt owed to
holders of record of interests in the Portfolio ( Holders ) or their
affiliates, and the expenses of liquidation, and to the setting up of any
reserves for contingencies which may be necessary; and (b) second, then in
accordance with the Holders' positive Book Capital Account balances after
adjusting Book Capital Accounts for certain allocations provided in the
Declaration of Trust and in accordance with the requirements described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2). Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the assets of the Portfolio would cause undue loss to the
Holders, the Trustees, in order to avoid such loss, may, after having
given notification to all the Holders, to the extent not then prohibited
by the law of any jurisdiction in which the Portfolio is then formed or
qualified and applicable in the circumstances, either defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Portfolio except those necessary to satisfy the Portfolio's debts and
obligations or distribute the Portfolio's assets to the Holders in
liquidation. Interests in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except
as set forth below. Interests in the Portfolio may not be transferred.
Certificates representing an investor's interest in the Portfolio are
issued only upon the written request of a Holder.
Each Holder is entitled to vote in proportion to the amount of its
interest in the Portfolio. Holders do not have cumulative voting rights.
The Portfolio is not required and has no current intention to hold annual
meetings of Holders but the Portfolio will hold meetings of Holders when
in the judgment of the Portfolio's Trustees it is necessary or desirable
to submit matters to a vote of Holders at a meeting. Any action which may
be taken by Holders may be taken without a meeting if Holders holding more
than 50% of all interests entitled to vote (or such larger proportion
thereof as shall be required by any express provision of the Declaration
of Trust of the Portfolio) consent to the action in writing and the
consents are filed with the records of meetings of Holders.
The Portfolio's Declaration of Trust may be amended by vote of
Holders of more than 50% of all interests in the Portfolio at any meeting
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of Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all interests. The Trustees may also amend the Declaration of Trust
(without the vote or consent of Holders) to change the Portfolio's name or
the state or other jurisdiction whose law shall be the governing law, to
supply any omission or cure, correct or supplement any ambiguous,
defective or inconsistent provision, to conform the Declaration of Trust
to applicable federal law or regulations or to the requirements of the
Code, or to change, modify or rescind any provision, provided that such
change, modification or rescission is determined by the Trustees to be
necessary or appropriate and not to have a materially adverse effect on
the financial interests of the Holders. No amendment of the Declaration of
Trust which would change any rights with respect to any Holder's interest
in the Portfolio by reducing the amount payable thereon upon liquidation
of the Portfolio may be made, except with the vote or consent of the
Holders of two-thirds of all interests. References in the Declaration of
Trust and in Part A or this Part B to a specified percentage of, or
fraction of, interests in the Portfolio, means Holders whose combined Book
Capital Account balances represent such specified percentage or fraction
of the combined Book Capital Account balance of all, or a specified group
of, Holders.
In accordance with the Declaration of Trust, there normally will
be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event, the Trustees of
the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances, and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust provides that no person shall serve as a
Trustee if investors holding two-thirds of the outstanding interests have
removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances, the investors may call a meeting to remove a Trustee and
that the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The Portfolio may merge or consolidate with any other corporation,
association, trust or other organization or may sell or exchange all or
substantially all of its assets upon such terms and conditions and for
such consideration when and as authorized by the Holders of (a) 67% or
more of the interests in the Portfolio present or represented at the
meeting of Holders, if Holders of more than 50% of all interests are
present or represented by proxy, or (b) more than 50% of all interests,
whichever is less. The Portfolio may be terminated (i) by the affirmative
vote of Holders of not less than two-thirds of all interests at any
meeting of Holders or by an instrument in writing without a meeting,
executed by a majority of the Trustees and consented to by Holders of not
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less than two-thirds of all interests, or (ii) by the Trustees by written
notice to the Holders.
The Portfolio is organized as a trust under the laws of the State
of New York. Investors in the Portfolio will be held personally liable for
its obligations and liabilities, subject, however, to indemnification by
the Portfolio in the event that there is imposed upon an investor a
greater portion of the liabilities and obligations of the Portfolio than
its proportionate interest in the Portfolio. The Portfolio intends to
maintain fidelity and errors and omissions insurance deemed adequate by
the Trustees. Therefore, the risk of an investor incurring financial loss
on account of investor liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects
a Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Item 19. Purchase, Redemption and Pricing of Securities
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any public offering within the meaning
of Section 4(2) of the Securities Act of 1933. See Purchase of Interests
in the Portfolio and Redemption or Decrease of Interest in Part A.
Debt securities (other than mortgage-backed, "pass-through"
securities and short-term obligations maturing in sixty days or less),
including listed securities and securities for which price quotations are
available and forward contracts, will normally be valued on the basis of
market valuations furnished by pricing services. Mortgage-backed "pass-
through" securities are valued using a matrix pricing system which takes
into account closing bond valuations, yield differentials, anticipated
prepayments and interest rates. Financial futures contracts listed on
commodity exchanges and exchange-traded options are valued at closing
settlement prices. Over-the-counter options are valued at the mean
between the bid and asked prices provided by dealers. Short-term
obligations and money market securities maturing in sixty days or less are
valued at amortized cost which approximates value. Non-U.S. dollar
denominated short-term obligations maturing in sixty days or less are
valued at amortized cost as calculated in the base currency and translated
into U.S. dollars at the current exchange rate. Investments for which
market quotations are unavailable are valued at fair value using methods
determined in good faith by or at the direction of the Trustees of the
Portfolio.
The value of all assets and liabilities expressed in foreign
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currencies will be converted into U.S. dollar values at the mean between
the buying and selling rates of such currencies against U.S. dollars last
quoted on one of the principal markets for such currencies. Generally,
trading in foreign securities, derivative instruments and currencies is
substantially completed each day at various times prior to the time the
Portfolio calculates its net asset value. If an event materially
affecting the values of such securities, instruments or currencies occurs
between the time such values are determined and the time net asset value
is calculated, such securities, instruments or currencies may be valued at
fair value.
Item 20. Tax Status
The Portfolio has been advised by tax counsel that, provided the
Portfolio is operated at all times during its existence in accordance with
certain organizational and operational documents, the Portfolio should be
classified as a partnership under the Internal Revenue Code of 1986, as
amended (the "Code"), and it should not be a publicly traded partnership
within the meaning of Section 7704 of the Code. Consequently, the
Portfolio does not expect that it will be required to pay any federal
income tax, and a Holder will be required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gains, losses and deductions.
Under Subchapter K of the Code, a partnership is considered to be
either an aggregate of its members or a separate entity, depending upon
the factual and legal context in which the question arises. Under the
aggregate approach, each partner is treated as an owner of an undivided
interest in partnership assets and operations. Under the entity approach,
the partnership is treated as a separate entity in which partners have no
direct interest in partnership assets and operations. The Portfolio has
been advised by tax counsel that, in the case of a Holder that seeks to
qualify as a RIC, the aggregate approach should apply, and each such
Holder should accordingly be deemed to own a proportionate share of each
of the assets of the Portfolio and to be entitled to the gross income of
the Portfolio attributable to that share for purposes of all requirements
of Sections 851(b) and 852(b)(5) of the Code. Further, the Portfolio has
been advised by tax counsel that each Holder that seeks to qualify as a
RIC should be deemed to hold its proportionate share of the Portfolio's
assets for the period the Portfolio has held the assets or for the period
the Holder has been an investor in the Portfolio, whichever is shorter.
Investors should consult their tax advisors regarding whether the entity
or the aggregate approach applies to their investment in the Portfolio in
light of their particular tax status and any special tax rules applicable
to them.
In order to enable a Holder that is otherwise eligible to qualify
as a RIC, the Portfolio intends to satisfy the requirements of Subchapter
M of the Code relating to sources of income and diversification of assets
as if they were applicable to the Portfolio and to allocate and permit
withdrawals in a manner that will enable a Holder that is a RIC to comply
with those requirements. The Portfolio will allocate at least annually to
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each Holder such Holder's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit in a manner intended to comply
with the Code and applicable Treasury regulations. Tax counsel has advised
the Portfolio that the Portfolio's allocations of taxable income and loss
should have "economic effect" under applicable Treasury regulations.
To the extent the cash proceeds of any withdrawal (or, under
certain circumstances, such proceeds plus the value of any marketable
securities distributed to an investor) ("liquid proceeds") exceed a
Holder's adjusted basis of his interest in the Portfolio, the Holder will
generally realize a gain for federal income tax purposes. If, upon a
complete withdrawal (redemption of the entire interest), the Holder's
adjusted basis of his interest exceeds the liquid proceeds of such
withdrawal, the Holder will generally realize a loss for federal income
tax purposes. The tax consequences of a withdrawal of property (instead
of or in addition to liquid proceeds) will be different and will depend on
the specific factual circumstances. A Holder's adjusted basis of an
interest in the Portfolio will generally be the aggregate prices paid
therefor (including the adjusted basis of contributed property and any
gain recognized on such contribution), increased by the amounts of the
Holder's distributive share of items of income (including interest income
exempt from federal income tax) and realized net gain of the Portfolio,
and reduced, but not below zero, by (i) the amounts of the Holder's
distributive share of items of Portfolio loss, and (ii) the amount of any
cash distributions (including distributions of interest income exempt from
federal income tax and cash distributions on withdrawals from the
Portfolio) and the basis to the Holder of any property received by such
Holder other than in liquidation, and (iii) the Holder's distributive
share of the Portfolio's nondeductible expenditures not properly
chargeable to capital account. Increases or decreases in a Holder's share
of the Portfolio's liabilities may also result in corresponding increases
or decreases in such adjusted basis. Distributions of liquid proceeds in
excess of a Holder's adjusted basis in its interest in the Portfolio
immediately prior thereto generally will result in the recognition of gain
to the Holder in the amount of such excess.
The Portfolio may acquire zero coupon or other securities issued
with original issue discount. As the holder of those securities, the
Portfolio must account for the original issue discount that accrues on the
securities during the taxable year, even if it receives no corresponding
payment on the securities during the year. Because each Holder that is a
RIC must distribute annually substantially all of its investment company
taxable income and net tax-exempt income, including any original issue
discount, to qualify for treatment as a RIC, any such Holder may be
required in a particular year to distribute as an "exempt-interest
dividend" an amount that is greater than its proportionate share of the
total amount of cash the Portfolio actually receives. Those distributions
will be made from the Holder's cash assets, if any, or from its
proportionate share of the Portfolio's cash assets or the proceeds of
sales of the Portfolio's securities, if necessary. The Portfolio may
realize capital gains or losses from those sales, which would increase or
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decrease the investment company taxable income and/or net capital gain
(the excess of net long-term capital gain over net short-term capital
loss) of a Holder that is a RIC. In addition, any such gains may be
realized on the disposition of securities held for less than three months.
Because of the Short-Short Limitation (defined below), any such gains
would reduce the Portfolio's ability to sell other securities, or options
or futures contracts, held for less than three months that it might wish
to sell in the ordinary course of its portfolio management.
The appropriate tax accounting for dollar rolls is also uncertain
in some respects, and the Portfolio's use of such rolls may accordingly be
limited in order to preserve an investor's qualification as a RIC.
Investments in lower-rated or unrated securities may present
special tax issues for the Portfolio and hence to an investor in the
Portfolio to the extent actual or anticipated defaults may be more likely
with respect to such securities. Tax rules are not entirely clear about
issues such as when the Portfolio may cease to accrue interest, original
issue discount, or market discount; when and to what extent deductions may
be taken for bad debts or worthless securities; how payments received on
obligations in default should be allocated between principal and income;
and whether exchanges of debt obligations in a workout context are
taxable.
The Portfolio may be subject to foreign withholding or other
foreign taxes with respect to income (possibly including, in some cases,
capital gains) derived from foreign securities. These taxes may be reduced
or eliminated under the terms of an applicable U.S. income tax treaty.
Because it is expected that more than 50% of the value of the total assets
of the Portfolio at the close of any taxable year will consist of
securities issued by foreign corporations, an investor that is a RIC may
be eligible to pass through to its shareholders their proportionate shares
of foreign taxes paid by the Portfolio and allocated to the RIC, with the
result that shareholders would include such proportionate shares in income
subject to federal income tax and would be entitled to take a foreign tax
credit or deduction for such foreign taxes, subject to certain
limitations. Certain foreign exchange gains and losses realized by the
Portfolio and allocated to the RIC will be treated as ordinary income and
losses. Certain uses of foreign currency, foreign currency options,
futures and forward contracts, and interest rate and currency swaps, and
investment by the Portfolio in certain passive foreign investment
companies , may be limited or a tax election may be made, if available, in
order to enable an investor that is a RIC to preserve its qualification as
a RIC or to avoid imposition of a tax on such an investor.
The Portfolio's transactions in options, futures contracts and
forward contracts will be subject to special tax rules that may affect the
amount, timing and character of its items of income, gain or loss and
hence the allocations of such items to investors. For example, certain
positions held by the Portfolio on the last business day of each taxable
B - 32
<PAGE>
year will be marked to market (i.e., treated as if closed out on such
day), and any resulting gain or loss will generally be treated as 60%
long-term and 40% short-term capital gain or loss. Certain positions held
by the Portfolio that substantially diminish the Portfolio's risk of loss
with respect to other positions in its portfolio may constitute
straddles, which are subject to tax rules that may cause deferral of
Portfolio losses, adjustments in the holding period of Portfolio
securities and conversion of short-term into long-term capital losses.
The Portfolio may make certain elections to mitigate adverse consequences
of these tax rates and may have to limit its activities in options,
futures contracts and forward contracts in order to enable an investor
that is a RIC to preserve its qualification as a RIC.
Income from transactions in options and futures contracts derived
by the Portfolio with respect to its business of investing in securities
will qualify as permissible income for its Holders that are RICs under the
requirement that at least 90% of a RIC's gross income each taxable year
consist of specified types of income. However, income from the dispo-
sition by the Portfolio of options and futures contracts held for less
than three months will be subject to the requirement applicable to those
Holders that less than 30% of a RIC's gross income each taxable year
consist of certain short-term gains ("Short-Short Limitation").
If the Portfolio satisfies certain requirements, any increase in
value of a position that is part of a "designated hedge" will be offset by
any decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Holders that are RICs satisfy the Short-Short Limitation.
Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. The Portfolio
will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Portfolio does not so qualify, it
may be forced to defer the closing out of options and futures contracts
beyond the time when it otherwise would be advantageous to do so, in order
for Holders that are RICs to continue to qualify as such.
An entity that is treated as a partnership under the Code, such
as the Portfolio, is generally treated as a partnership under state and
local tax laws, but certain states may have different entity
classification criteria and may therefore reach a different conclusion.
Entities that are classified as partnerships are not treated as separate
taxable entities under most state and local tax laws, and the income of a
partnership is considered to be income of partners both in timing and in
character. The laws of the various states and local taxing authorities
vary with respect to the status of a partnership interest under state and
local tax laws, and each holder of an interest in the Portfolio is advised
to consult his own tax adviser.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Investors should consult
their own tax advisers with respect to special tax rules that may apply in
B - 33
<PAGE>
their particular situations, as well as the state, local or foreign tax
consequences of investing in the Portfolio.
Item 21. Underwriters
The placement agent for the Portfolio is Eaton Vance Distributors,
Inc., which receives no compensation for serving in this capacity.
Investment companies, common and commingled trust funds and similar
organizations and entities may continuously invest in the Portfolio.
Item 22. Calculation of Performance Data
Not applicable.
Item 23. Financial Statements
The following audited financial statements of the Portfolio, which
are included in the Annual Report to Shareholders of EV Marathon Strategic
Income Fund, for the fiscal year ended October 31, 1995, are incorporated
by reference into this Part B and have been so incorporated in reliance
upon the report of Coopers & Lybrand L.L.P., independent accountants, as
experts in accounting and auditing.
Portfolio of Investments as of October 31, 1995
Statement of Assets and Liabilities as of October 31, 1995
Statement of Operations for the fiscal year ended October
31, 1995
Statement of Changes in Net Assets for the fiscal year
ended October 31, 1995, and for the period from the start
of business, March 1, 1994, to October 31, 1994
Supplementary Data for the fiscal year ended October 31,
1995, and for the period from the start of business, March
1, 1994, to October 31, 1994
Notes to Financial Statements
Report of Independent Accountants
For purposes of the EDGAR filing of this amendment to the
Portfolio's registration statement, the Portfolio incorporates by
reference the above audited financial statements of the Portfolio
contained in the Annual Report to Shareholders of EV Marathon Strategic
Income Fund for the fiscal year ended October 31, 1995, as previously
B - 34
<PAGE>
filed electronically with the Securities and Exchange Commission
(Accession Number 0000928816-96-000014).
B - 35
<PAGE>
APPENDIX A
Description of Securities Ratings(1)
Description of Moody's Investors Service, Inc.'s corporate bond ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as gilt edged. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risk appear
somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
a - 1
<PAGE>
in a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in its corporated bond rating
system. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Short-Term Debt
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of one year.
Issuers rated Prime-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or
P-1 repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
-- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 or P-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Description of Standard & Poor's Ratings Group's corporate bond ratings:
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
a - 2
<PAGE>
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt
a - 3
<PAGE>
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Bonds may lack a S&P's rating because no public rating has been
requested, because there is insufficient information on which to base a
rating, or because Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Commercial Paper
A: S&P's commercial paper rating is a current assessment of the likelihood
of timely payment of debt considered short-term in the relevant market.
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1 .
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
Fitch Investors Service, Inc.
Investment Grade Bond Ratings
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA: Bonds considered to be investment grade and of very high credit
a - 4
<PAGE>
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA . Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+ .
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
High Yield Bond Ratings
BB: Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
that could assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default of interest and/or principal
payments. Such bonds are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these
bonds, and D represents the lowest potential for recovery.
Plus (+) or Minus (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a
credit within the rating category.
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<PAGE>
NR: Indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful completion
of a project or the occurrence of a specific event.
Investment Grade Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes,
and municipal and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+ .
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the F-1+ and F-1 categories.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate;
however, near-term adverse changes could cause these securities to be
rated below investment grade.
Duff & Phelps
Investment Grade Bond Ratings
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, and AA-: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A, and A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, and BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
High Yield Bond Ratings
BB+, BB, and BB-: Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection factors
fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
a - 6
<PAGE>
B+, B, and B-: Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate
widely according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
Preferred stocks are rated on the same scale as bonds but the preferred
rating gives weight to its more junior position in the capital structure.
Structured Financings are also rated on this scale.
Commercial Paper/Certificates of Deposit
Category 1: Top Grade
Duff 1 plus: Highest certainty of timely payment. Short-term liquidity
including internal operating factors and/or ready access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1 minus: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protections factors. Risk factors
are very small.
Category 2: Good Grade
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors
are small.
Category 3: Satisfactory Grade
Duff 3: Satisfactory liquidity and other protection factors qualify issue
as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless timely payment is expected.
No ratings are issued for companies whose paper is not deemed to be of
investment grade.
* * *
Notes: (1) The ratings indicated herein are believed to be the most
a - 7
<PAGE>
recent ratings available at the date of this Registration Statement, as
amended, for the securities listed. Ratings are generally given to
securities at the time of issuance. While the rating agencies may from
time to time revise such ratings, they undertake no obligation to do so,
and the ratings indicated do not necessarily represent ratings which would
be given to these securities on the date of the Portfolio's fiscal year
end.
Bonds which are unrated expose the investor to risks with respect
to capacity to pay interest or repay principal which are similar to the
risks of lower-rated bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such
bonds.
Investors should note that the assignment of a rating to a bond by
a rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
a - 8
<PAGE>
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The Financial statements called for by this Item are incorporated by
reference in Part B and listed in Item 23 hereof.
(b) Exhibits
1. (a) Declaration of Trust of the Registrant dated May 1, 1992
filed herewith.
(b) Amendment to Declaration of Trust dated February 23, 1994
filed herewith.
(c) Amendment to Declaration of Trust dated March 1, 1995
filed herewith.
2. By-Laws of the Registrant as adopted May 1, 1992 filed
herewith.
5. Investment Advisory Agreement between the Registrant and
Boston Management and Research dated March 1, 1994.*
6. Placement Agent Agreement between the Registrant and Eaton
Vance Distributors, Inc. dated March 1, 1994.*
8. (a) Custodian Agreement between the Registrant and Investors
Bank & Trust Company dated March 1, 1994 filed herewith.
(b) Amendment to Custodian Agreement dated October 23, 1995
filed herewith.
9. Administration Agreement between the Registrant and Boston
Management and Research dated March 1, 1994.*
13. Investment representation letter of Eaton Vance Investment
Fund, Inc., on behalf of Eaton Vance Short-Term Global Income
Fund, dated December 14, 1993.*
C - 1
<PAGE>
* Filed as an exhibit to Amendment No. 1, which was filed with the
Securities and Exchange Commission on February 28, 1995 (Accession No.
0000898432-95-000062), and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of
Title of Class Record Holders
Interests As of February 14, 1996
4
Item 27. Indemnification
Reference is hereby made to Article V of the Registrant's
Declaration of Trust, filed as an Exhibit herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
Item 28. Business and Other Connections
To the knowledge of the Portfolio, none of the trustees or officers
of the Portfolio's investment adviser, except as set forth on its Form ADV
as filed with the SEC, is engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain
trustees and officers also hold various positions with and engage in
business for affiliates of the investment adviser.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
All applicable accounts, books and documents required to be
maintained by the Registrant by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder are in the possession and
custody of the Registrant's custodian, Investors Bank & Trust Company, 89
South Street, Boston, MA 02111, with the exception of certain corporate
documents and portfolio trading documents, which are in the possession and
custody of the Registrant's investment adviser at 24 Federal Street,
Boston, MA 02110. The Registrant is informed that all applicable
C - 2
<PAGE>
accounts, books and documents required to be maintained by registered
investment advisers are in the custody and possession of the Registrant's
investment adviser.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
C - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this amendment to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and Commonwealth of
Massachusetts on the 27th day of February, 1996.
STRATEGIC INCOME PORTFOLIO
By /s/ James L. O'Connor
------------------------
James L. O'Connor
Treasurer
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1(a). Declaration of Trust of the Registrant dated May 1, 1992.
1(b). Amendment to Declaration of Trust dated February 23, 1994.
1(c). Amendment to Declaration of Trust dated March 1, 1995.
2. By-Laws of the Registrant as adopted May 1, 1992.
8(a). Custodian Agreement between the Registrant and Investors Bank
& Trust Company dated March 1, 1994.
8(b). Amendment to Custodian Agreement dated October 23, 1995.
<PAGE>
SHORT-TERM GLOBAL INCOME PORTFOLIO
-----------------
DECLARATION OF TRUST
Dated as of May 1, 1992
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I--The Trust . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . 1
ARTICLE II--Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Number and Qualification . . . . . . . . . . 3
Section 2.2 Term and Election . . . . . . . . . . . . . 3
Section 2.3 Resignation, Removal and Retirement . . . . 3
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . 4
Section 2.5 Meetings . . . . . . . . . . . . . . . . . . 4
Section 2.6 Officers; Chairman of the Board . . . . . . 5
Section 2.7 By-Laws . . . . . . . . . . . . . . . . . . 5
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . . . . . 5
Section 3.1 General . . . . . . . . . . . . . . . . . . 5
Section 3.2 Investments . . . . . . . . . . . . . . . . 6
Section 3.3 Legal Title . . . . . . . . . . . . . . . . 6
Section 3.4 Sale and Increases of Interests . . . . . . 7
Section 3.5 Decreases and Redemptions of Interests . . . 7
Section 3.6 Borrow Money . . . . . . . . . . . . . . . 7
Section 3.7 Delegation; Committees . . . . . . . . . . . 7
Section 3.8 Collection and Payment . . . . . . . . . . . 7
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . 7
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . 8
Section 3.11 Further Powers . . . . . . . . . . . . . . . 8
ARTICLE IV--Investment Advisory, Administration and Placement Agent
Arrangements . . . . . . . . . . . . . . . . . . . 8
Section 4.1 Investment Advisory, Administration and Other
Arrangements . . . . . . . . . . . . . . . . 8
Section 4.2 Parties to Contract . . . . . . . . . . . . 9
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc. . . . . . . . . . . . . . . . . . . . 9
Section 5.1 Liability of Holders; Indemnification . . . . 9
Section 5.2 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties . . . . . . . . 10
Section 5.3 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Trust, Holders, etc. . . . . 10
Section 5.4 Mandatory Indemnification . . . . . . . . . 10
Section 5.5 No Bond Required of Trustees . . . . . . . . 11
i
<PAGE>
PAGE
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . 11
Section 5.7 Reliance on Experts, etc. . . . . . . . . . 11
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.1 Interests . . . . . . . . . . . . . . . . . 12
Section 6.2 Non-Transferability . . . . . . . . . . . . 12
Section 6.3 Register of Interests . . . . . . . . . . . 12
ARTICLE VII--Increases, Decreases And Redemptions of Interests . . . . 12
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions . . . . . . . . . . . . . . . . . . . 13
Section 8.1 Book Capital Account Balances . . . . . . . . 13
Section 8.2 Allocations and Distributions to Holders . . 13
Section 8.3 Power to Modify Foregoing Procedures . . . . 13
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.1 Rights of Holders . . . . . . . . . . . . . . 13
Section 9.2 Meetings of Holders . . . . . . . . . . . . . 13
Section 9.3 Notice of Meetings . . . . . . . . . . . . . 14
Section 9.4 Record Date for Meetings, Distributions, etc. 14
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . 14
Section 9.6 Reports . . . . . . . . . . . . . . . . . . . 15
Section 9.7 Inspection of Records . . . . . . . . . . . . 15
Section 9.8 Holder Action by Written Consent . . . . . . 15
Section 9.9 Notices . . . . . . . . . . . . . . . . . . 15
ARTICLE X--Duration; Termination; Amendment; Mergers; Etc. . . . . . . 16
Section 10.1 Duration . . . . . . . . . . . . . . . . . . 16
Section 10.2 Termination . . . . . . . . . . . . . . . . 17
Section 10.3 Dissolution . . . . . . . . . . . . . . . . . 17
Section 10.4 Amendment Procedure . . . . . . . . . . . . . 18
Section 10.5 Merger, Consolidation and Sale of Assets . 19
Section 10.6 Incorporation . . . . . . . . . . . . . . . . 19
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 19
Section 11.1 Certificate of Designation; Agent for
Service . . . . . . . . . . . . . . . . . . 19
Section 11.2 Governing Law . . . . . . . . . . . . . . . 19
Section 11.3 Counterparts . . . . . . . . . . . . . . . . 19
Section 11.4 Reliance by Third Parties . . . . . . . . . . 20
Section 11.5 Provisions in Conflict With Law or
Regulations . . . . . . . . . . . . . . . . 20
ii
<PAGE>
DECLARATION OF TRUST
OF
SHORT-TERM GLOBAL INCOME PORTFOLIO
----------------------------------
This DECLARATION OF TRUST of Short-Term Global Income
Portfolio is made as of the 1st day of May, 1992 by the parties signatory
hereto, as Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under
the law of the State of New York for the investment and reinvestment of
its assets; and
WHEREAS, it is proposed that the trust assets be composed
of money and property contributed thereto by the holders of interests in
the trust entitled to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they
will hold in trust all money and property contributed to the trust fund
and will manage and dispose of the same for the benefit of the holders of
interests in the Trust and subject to the provisions hereof, to wit:
ARTICLE I
The Trust
---------
1.1. Name. The name of the trust created hereby (the
"Trust") shall be Short-Term Global Income Portfolio and so far as may be
practicable the Trustees shall conduct the Trust's activities, execute all
documents and sue or be sued under that name, which name (and the word
"Trust" wherever hereinafter used) shall refer to the Trustees as
Trustees, and not individually, and shall not refer to the officers,
employees, agents or independent contractors of the Trust or holders of
interests in the Trust.
1.2. Definitions. As used in this Declaration, the
following terms shall have the following meanings:
"Administrator" shall mean any party furnishing services
to the Trust pursuant to any administration contract described in Section
4.1 hereof.
"Book Capital Account" shall mean, for any Holder at any
time, the Book Capital Account of the Holder for such day, determined in
accordance with Section 8.1 hereof.
<PAGE>
"Code" shall mean the U.S. Internal Revenue Code of 1986,
as amended from time to time, as well as any non-superseded provisions of
the U.S. Internal Revenue Code of 1954, as amended (or any corresponding
provision or provisions of succeeding law).
"Commission" shall mean the U.S. Securities and Exchange
Commission.
"Declaration" shall mean this Declaration of Trust as
amended from time to time. References in this Declaration to
"Declaration", "hereof", "herein" and "hereunder" shall be deemed to refer
to this Declaration rather than the article or section in which any such
word appears.
"Fiscal Year" shall mean an annual period determined by
the Trustees which ends on October 31 of each year or on such other day as
is permitted or required by the Code.
"Holders" shall mean as of any particular time all
holders of record of Interests in the Trust.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign investment company,
common trust fund, group trust or other investment arrangement, whether
organized within or without the United States of America, other than an
individual, S corporation, partnership or grantor trust beneficially owned
by any individual, S corporation or partnership.
"Interest(s)" shall mean the interest of a Holder in the
Trust, including all rights, powers and privileges accorded to Holders by
this Declaration, which interest may be expressed as a percentage,
determined by calculating, at such times and on such basis as the Trustees
shall from time to time determine, the ratio of each Holder's Book Capital
Account balance to the total of all Holders' Book Capital Account
balances. Reference herein to a specified percentage of, or fraction of,
Interests, means Holders whose combined Book Capital Account balances
represent such specified percentage or fraction of the combined Book
Capital Account balances of all, or a specified group of, Holders.
"Interested Person" shall have the meaning given it in
the 1940 Act.
"Investment Adviser" shall mean any party furnishing
services to the Trust pursuant to any investment advisory contract
described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a
meeting of Holders, of (A) 67% or more of the Interests present or
represented at such meeting, if Holders of more than 50% of all Interests
are present or represented by proxy, or (B) more than 50% of all
Interests, whichever is less.
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<PAGE>
"Person" shall mean and include individuals,
corporations, partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Redemption" shall mean the complete withdrawal of an
Interest of a Holder the result of which is to reduce the Book Capital
Account balance of that Holder to zero, and the term "redeem" shall mean
to effect a Redemption.
"Trustees" shall mean each signatory to this Declaration,
so long as such signatory shall continue in office in accordance with the
terms hereof, and all other individuals who at the time in question have
been duly elected or appointed and have qualified as Trustees in
accordance with the provisions hereof and are then in office, and
reference in this Declaration to a Trustee or Trustees shall refer to such
individual or individuals in their capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any
and all property, real or personal, tangible or intangible, which at such
time is owned or held by or for the account of the Trust or the Trustees.
The "1940 Act" shall mean the U.S. Investment Company Act
of 1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE II
Trustees
--------
2.1. Number and Qualification. The number of Trustees
shall be fixed from time to time by action of the Trustees taken as
provided in Section 2.5 hereof; provided, however, that the number of
Trustees so fixed shall in no event be less than three or more than 15.
Any vacancy created by an increase in the number of Trustees may be filled
by the appointment of an individual having the qualifications described in
this Section 2.1 made by action of the Trustees taken as provided in
Section 2.5 hereof. Any such appointment shall not become effective,
however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the
number of Trustees shall have the effect of removing any Trustee from
office. Whenever a vacancy occurs, until such vacancy is filled as
provided in Section 2.4 hereof, the Trustees continuing in office,
regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by
this Declaration. A Trustee shall be an individual at least 21 years of
age who is not under legal disability.
2.2. Term and Election. Each Trustee named herein, or
elected or appointed prior to the first meeting of Holders, shall (except
in the event of resignations, retirements, removals or vacancies pursuant
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<PAGE>
to Section 2.3 or Section 2.4 hereof) hold office until a successor to
such Trustee has been elected at such meeting and has qualified to serve
as Trustee, as required under the 1940 Act. Subject to the provisions of
Section 16(a) of the 1940 Act and except as provided in Section 2.3
hereof, each Trustee shall hold office during the lifetime of the Trust
and until its termination as hereinafter provided.
2.3. Resignation, Removal and Retirement. Any Trustee
may resign his or her trust (without need for prior or subsequent
accounting) by an instrument in writing executed by such Trustee and
delivered or mailed to the Chairman, if any, the President or the
Secretary of the Trust and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the instrument.
Any Trustee may be removed by the affirmative vote of Holders of two-
thirds of the Interests or (provided the aggregate number of Trustees,
after such removal and after giving effect to any appointment made to fill
the vacancy created by such removal, shall not be less than the number
required by Section 2.1 hereof) with cause, by the action of two-thirds of
the remaining Trustees. Removal with cause includes, but is not limited
to, the removal of a Trustee due to physical or mental incapacity or
failure to comply with such written policies as from time to time may be
adopted by at least two-thirds of the Trustees with respect to the conduct
of the Trustees and attendance at meetings. Any Trustee who has attained
a mandatory retirement age, if any, established pursuant to any written
policy adopted from time to time by at least two-thirds of the Trustees
shall, automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such
policy, effective as of the date determined in accordance with such
policy. Any Trustee who has become incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the
date of such Trustee's retirement. Upon the resignation, retirement or
removal of a Trustee, or a Trustee otherwise ceasing to be a Trustee, such
resigning, retired, removed or former Trustee shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held
in the name of such resigning, retired, removed or former Trustee. Upon
the death of any Trustee or upon removal, retirement or resignation due to
any Trustee's incapacity to serve as Trustee, the legal representative of
such deceased, removed, retired or resigning Trustee shall execute and
deliver on behalf of such deceased, removed, retired or resigning Trustee
such documents as the remaining Trustees shall require for the purpose set
forth in the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, retirement, adjudicated incompetence or other incapacity to
perform the duties of the office, or removal, of a Trustee. No such
vacancy shall operate to annul this Declaration or to revoke any existing
agency created pursuant to the terms of this Declaration. In the case of
a vacancy, Holders of at least a majority of the Interests entitled to
vote, acting at any meeting of Holders held in accordance with Section 9.2
4
<PAGE>
hereof, or, to the extent permitted by the 1940 Act, a majority vote of
the Trustees continuing in office acting by written instrument or
instruments, may fill such vacancy, and any Trustee so elected by the
Trustees or the Holders shall hold office as provided in this Declaration.
2.5. Meetings. Meetings of the Trustees shall be held
from time to time upon the call of the Chairman, if any, the President,
the Secretary, an Assistant Secretary or any two Trustees, at such time,
on such day and at such place, as shall be designated in the notice of the
meeting. The Trustees shall hold an annual meeting for the election of
officers and the transaction of other business which may come before such
meeting. Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given by mail, by telegram
(which term shall include a cablegram), by telecopier or delivered
personally (which term shall include by telephone). If notice is given by
mail, it shall be mailed not later than 48 hours preceding the meeting and
if given by telegram, telecopier or personally, such notice shall be sent
or delivery made not later than 24 hours preceding the meeting. Notice of
a meeting of Trustees may be waived before or after any meeting by signed
written waiver. Neither the business to be transacted at, nor the purpose
of, any meeting of the Trustees need be stated in the notice or waiver of
notice of such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except in the situation in
which a Trustee attends a meeting for the express purpose of objecting, at
the commencement of such meeting, to the transaction of any business on
the ground that the meeting was not lawfully called or convened. The
Trustees may act with or without a meeting, but no notice need be given of
action proposed to be taken by written consent. A quorum for all meetings
of the Trustees shall be a majority of the Trustees. Unless provided
otherwise in this Declaration, any action of the Trustees may be taken at
a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the
Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all
meetings of any such committee shall be a majority of the members thereof.
Unless provided otherwise in this Declaration, any action of any such
committee may be taken at a meeting by vote of a majority of the members
present (a quorum being present) or without a meeting by written consent
of a majority of the members.
With respect to actions of the Trustees and any committee
of the Trustees, Trustees who are Interested Persons of the Trust or
otherwise interested in any action to be taken may be counted for quorum
purposes under this Section 2.5 and shall be entitled to vote to the
extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a
meeting of the Trustees or any committee thereof by means of a conference
telephone or similar communications equipment by means of which all
5
<PAGE>
individuals participating in the meeting can hear each other and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
2.6. Officers; Chairman of the Board. The Trustees
shall, from time to time, elect a President, a Secretary and a Treasurer.
The Trustees may elect or appoint, from time to time, a Chairman of the
Board who shall preside at all meetings of the Trustees and carry out such
other duties as the Trustees may designate. The Trustees may elect or
appoint or authorize the President to appoint such other officers, agents
or independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each other officer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time
to time, amend or repeal By-Laws for the conduct of the business of the
Trust.
ARTICLE III
Powers of Trustees
------------------
3.1. General. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the
Trust to the same extent as if the Trustees were the sole owners of the
Trust Property and such business in their own right, but with such powers
of delegation as may be permitted by this Declaration. The Trustees may
perform such acts as in their sole discretion they deem proper for
conducting the business of the Trust. The enumeration of or failure to
mention any specific power herein shall not be construed as limiting such
exclusive and absolute control. The powers of the Trustees may be
exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the
business of an investment company;
(b) subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute or otherwise deal in or dispose of U.S. and foreign
currencies and related instruments including forward contracts, and
securities, including common and preferred stock, warrants, bonds,
debentures, time notes and all other evidences of indebtedness, negotiable
or non-negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, forward contracts, options, futures
contracts, and other securities, including, without limitation, those
issued, guaranteed or sponsored by any state, territory or possession of
the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the U.S. Government,
any foreign government, or any agency, instrumentality or political
6
<PAGE>
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the
United States or under any foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of any kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of such
rights, powers and privileges in respect of any of such investments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional instruments in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in
obligations maturing before the possible termination of the Trust, nor
shall the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees
shall have the power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the
Trust, or in the name or nominee name of any other Person on behalf of the
Trust, on such terms as the Trustees may determine.
The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each individual who may
hereafter become a Trustee upon his due election and qualification. Upon
the resignation, removal or death of a Trustee, such resigning, removed or
deceased Trustee shall automatically cease to have any right, title or
interest in any Trust Property, and the right, title and interest of such
resigning, removed or deceased Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4. Sale and Increases of Interests. The Trustees,
in their discretion, may, from time to time, without a vote of the
Holders, permit any Institutional Investor to purchase an Interest, or
increase its Interest, for such type of consideration, including cash or
property, at such time or times (including, without limitation, each
business day), and on such terms as the Trustees may deem best, and may in
such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
businesses. Individuals, S corporations, partnerships and grantor trusts
that are beneficially owned by any individual, S corporation or
partnership may not purchase Interests. A Holder which has redeemed its
Interest may not be permitted to purchase an Interest until the later of
60 calendar days after the date of such Redemption or the first day of the
Fiscal Year next succeeding the Fiscal Year during which such Redemption
occurred.
7
<PAGE>
3.5 Decreases and Redemptions of Interests. Subject
to Article VII hereof, the Trustees, in their discretion, may, from time
to time, without a vote of the Holders, permit a Holder to redeem its
Interest, or decrease its Interest, for either cash or property, at such
time or times (including, without limitation, each business day), and on
such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to
borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust, including the lending of portfolio securities, and to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have
power, consistent with their continuing exclusive and absolute control
over the Trust Property and over the business of the Trust, to delegate
from time to time to such of their number or to officers, employees,
agents or independent contractors of the Trust the doing of such things
and the execution of such instruments in either the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have
power to collect all property due to the Trust; and to pay all claims,
including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust or the Trust
Property; to foreclose any security interest securing any obligation, by
virtue of which any property is owed to the Trust; and to enter into
releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur
and pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to
pay reasonable compensation from the Trust Property to themselves as
Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal and brokerage services, as they in
good faith may deem reasonable, and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust.
3.10. Miscellaneous Powers. The Trustees shall have
power to: (a) employ or contract with such Persons as the Trustees may
deem appropriate for the transaction of the business of the Trust and
terminate such employees or contractual relationships as they consider
appropriate; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) purchase, and pay for out of Trust
Property, insurance policies insuring the Investment Adviser,
Administrator, placement agent, Holders, Trustees, officers, employees,
agents or independent contractors of the Trust against all claims arising
by reason of holding any such position or by reason of any action taken or
omitted by any such Person in such capacity, whether or not the Trust
would have the power to indemnify such Person against such liability; (d)
8
<PAGE>
establish pension, profit-sharing and other retirement, incentive and
benefit plans for the Trustees, officers, employees or agents of the
Trust; (e) make donations, irrespective of benefit to the Trust, for
charitable, religious, educational, scientific, civic or similar purposes;
(f) to the extent permitted by law, indemnify any Person with whom the
Trust has dealings, including the Investment Adviser, Administrator,
placement agent, Holders, Trustees, officers, employees, agents or
independent contractors of the Trust, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations of
others; (h) determine and change the Fiscal Year and the method by which
the accounts of the Trust shall be kept; and (i) adopt a seal for the
Trust, but the absence of such a seal shall not impair the validity of any
instrument executed on behalf of the Trust.
3.11. Further Powers. The Trustees shall have power to
conduct the business of the Trust and carry on its operations in any and
all of its branches and maintain offices, whether within or without the
State of New York, in any and all states of the United States of America,
in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such
instruments as they deem necessary, proper, appropriate or desirable in
order to promote the interests of the Trust although such things are not
herein specifically mentioned. Any determination as to what is in the
interests of the Trust which is made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees. The
Trustees shall not be required to obtain any court order in order to deal
with Trust Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements
-----------------------------------
4.1. Investment Advisory, Administration and Other
Arrangements. The Trustees may in their discretion, from time to time,
enter into investment advisory contracts, administration contracts or
placement agent agreements whereby the other party to such contract or
agreement shall undertake to furnish the Trustees such investment
advisory, administration, placement agent and/or other services as the
Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole
discretion determine. Notwithstanding any provision of this Declaration,
the Trustees may authorize any Investment Adviser (subject to such general
or specific instructions as the Trustees may, from time to time, adopt) to
effect purchases, sales, loans or exchanges of Trust Property on behalf of
the Trustees or may authorize any officer, employee or Trustee to effect
such purchases, sales, loans or exchanges pursuant to recommendations of
any such Investment Adviser (all without any further action by the
9
<PAGE>
Trustees). Any such purchase, sale, loan or exchange shall be deemed to
have been authorized by the Trustees.
4.2. Parties to Contract. Any contract of the
character described in Section 4.1 hereof or in the By-Laws of the Trust
may be entered into with any corporation, firm, trust or association,
although one or more of the Trustees or officers of the Trust may be an
officer, director, Trustee, shareholder or member of such other party to
the contract, and no such contract shall be invalidated or rendered
voidable by reason of the existence of any such relationship, nor shall
any individual holding such relationship be liable merely by reason of
such relationship for any loss or expense to the Trust under or by reason
of any such contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this
Article IV or the By-Laws of the Trust. The same Person may be the other
party to one or more contracts entered into pursuant to Section 4.1 hereof
or the By-Laws of the Trust, and any individual may be financially
interested or otherwise affiliated with Persons who are parties to any or
all of the contracts mentioned in this Section 4.2 or in the By-Laws of
the Trust.
10
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ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
-------------------------------------
5.1. Liability of Holders; Indemnification. Each
Holder shall be jointly and severally liable (with rights of contribution
inter se in proportion to their respective Interests in the Trust) for the
liabilities and obligations of the Trust in the event that the Trust fails
to satisfy such liabilities and obligations; provided, however, that, to
the extent assets are available in the Trust, the Trust shall indemnify
and hold each Holder harmless from and against any claim or liability to
which such Holder may become subject by reason of being or having been a
Holder to the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders, is greater than such Holder's
Interest (proportionate share), and shall reimburse such Holder for all
legal and other expenses reasonably incurred by such Holder in connection
with any such claim or liability. The rights accruing to a Holder under
this Section 5.1 shall not exclude any other right to which such Holder
may be lawfully entitled, nor shall anything contained herein restrict the
right of the Trust to indemnify or reimburse a Holder in any appropriate
situation even though not specifically provided herein. Notwithstanding
the indemnification procedure described above, it is intended that each
Holder shall remain jointly and severally liable to the Trust's creditors
as a legal matter.
5.2. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Third Parties. No Trustee,
officer, employee, agent or independent contractor (except in the case of
an agent or independent contractor to the extent expressly provided by
written contract) of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or the Holders, in
connection with Trust Property or the affairs of the Trust; and all such
Persons shall look solely to the Trust Property for satisfaction of claims
of any nature against a Trustee, officer, employee, agent or independent
contractor (except in the case of an agent or independent contractor to
the extent expressly provided by written contract) of the Trust arising in
connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
provided by written contract) of the Trust shall be liable to the Trust or
the Holders for any action or failure to act (including, without
limitation, the failure to compel in any way any former or acting Trustee
to redress any breach of trust) except for such Person's own bad faith,
willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
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5.4. Mandatory Indemnification. The Trust shall
indemnify, to the fullest extent permitted by law (including the 1940
Act), each Trustee, officer, employee, agent or independent contractor
(except in the case of an agent or independent contractor to the extent
expressly provided by written contract) of the Trust (including any Person
who serves at the Trust's request as a director, officer or trustee of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to
any matter as to which such Person shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of such Person's duties; provided, however, that as to any
matter disposed of by a compromise payment by such Person, pursuant to a
consent decree or otherwise, no indemnification either for such payment or
for any other expenses shall be provided unless there has been a
determination that such Person did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such Person's office by the court or other body approving
the settlement or other disposition or by a reasonable determination,
based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that such Person did not engage in such conduct by
written opinion from independent legal counsel approved by the Trustees.
The rights accruing to any Person under these provisions shall not exclude
any other right to which such Person may be lawfully entitled; provided
that no Person may satisfy any right of indemnity or reimbursement granted
in this Section 5.4 or in Section 5.2 hereof or to which such Person may
be otherwise entitled except out of the Trust Property. The Trustees may
make advance payments in connection with indemnification under this
Section 5.4, provided that the indemnified Person shall have given a
written undertaking to reimburse the Trust in the event it is subsequently
determined that such Person is not entitled to such indemnification.
5.5. No Bond Required of Trustees. No Trustee shall,
as such, be obligated to give any bond or surety or other security for the
performance of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust
Instruments, etc. No purchaser, lender or other Person dealing with any
Trustee, officer, employee, agent or independent contractor of the Trust
shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by such Trustee, officer, employee,
agent or independent contractor or be liable for the application of money
or property paid, loaned or delivered to or on the order of such Trustee,
officer, employee, agent or independent contractor. Every obligation,
contract, instrument, certificate or other interest or undertaking of the
Trust, and every other act or thing whatsoever executed in connection with
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<PAGE>
the Trust shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees, officers, employees,
agents or independent contractors of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the
Trust made or sold by any Trustee, officer, employee, agent or independent
contractor of the Trust, in such capacity, shall contain an appropriate
recital to the effect that the Trustee, officer, employee, agent or
independent contractor of the Trust shall not personally be bound by or
liable thereunder, nor shall resort be had to their private property for
the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee,
officer, employee, agent or independent contractor of the Trust. Subject
to the provisions of the 1940 Act, the Trust may maintain insurance for
the protection of the Trust Property, the Holders, and the Trustees,
officers, employees, agents and independent contractors of the Trust in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust shall, in the
performance of such Person's duties, be fully and completely justified and
protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the
Trust (whether or not the Trust would have the power to indemnify such
Persons against such liability), upon an opinion of counsel, or upon
reports made to the Trust by any of its officers or employees or by any
Investment Adviser or Administrator, accountant, appraiser or other
experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
ARTICLE VI
Interests
--------
6.1. Interests. The beneficial interest in the Trust
Property shall consist of non-transferable Interests. The Interests shall
be personal property giving only the rights in this Declaration
specifically set forth. The value of an Interest shall be equal to the
Book Capital Account balance of the Holder of the Interest.
6.2. Non-Transferability. A Holder may not transfer,
sell or exchange its Interest.
6.3. Register of Interests. A register shall be kept
at the Trust under the direction of the Trustees which shall contain the
name, address and Book Capital Account balance of each Holder. Such
register shall be conclusive as to the identity of the Holders, and the
Trust shall not be bound to recognize any equitable or legal claim to or
13
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interest in an Interest which is not contained in such register. No
Holder shall be entitled to receive payment of any distribution, nor to
have notice given to it as herein provided, until it has given its address
to such officer or agent of the Trust as is keeping such register for
entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
-------------------------------------------------
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted
by the Trustees, each Holder shall have the right to vary its investment
in the Trust at any time without limitation by increasing (through a
capital contribution) or decreasing (through a capital withdrawal) or by a
Redemption of its Interest. An increase in the investment of a Holder in
the Trust shall be reflected as an increase in the Book Capital Account
balance of that Holder and a decrease in the investment of a Holder in the
Trust or the Redemption of the Interest of a Holder shall be reflected as
a decrease in the Book Capital Account balance of that Holder. The Trust
shall, upon appropriate and adequate notice from any Holder increase,
decrease or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the
Trustees; provided that (a) the amount received by the Holder upon any
such decrease or Redemption shall not exceed the decrease in the Holder's
Book Capital Account balance effected by such decrease or Redemption of
its Interest, and (b) if so authorized by the Trustees, the Trust may, at
any time and from time to time, charge fees for effecting any such
decrease or Redemption, at such rates as the Trustees may establish, and
may, at any time and from time to time, suspend such right of decrease or
Redemption. The procedures for effecting decreases or Redemptions shall
be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
--------------------------
8.1. Book Capital Account Balances. The Book Capital
Account balance of each Holder shall be determined on such days and at
such time or times as the Trustees may determine. The Trustees shall
adopt resolutions setting forth the method of determining the Book Capital
Account balance of each Holder. The power and duty to make calculations
pursuant to such resolutions may be delegated by the Trustees to the
Investment Adviser, Administrator, custodian, or such other Person as the
Trustees may determine. Upon the Redemption of an Interest, the Holder of
that Interest shall be entitled to receive the balance of its Book Capital
Account. A Holder may not transfer, sell or exchange its Book Capital
Account balance.
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8.2. Allocations and Distributions to Holders. The
Trustees shall, in compliance with the Code, the 1940 Act and generally
accepted accounting principles, establish the procedures by which the
Trust shall make (i) the allocation of unrealized gains and losses,
taxable income and tax loss, and profit and loss, or any item or items
thereof, to each Holder, (ii) the payment of distributions, if any, to
Holders, and (iii) upon liquidation, the final distribution of items of
taxable income and expense. Such procedures shall be set forth in writing
and be furnished to the Trust's accountants. The Trustees may amend the
procedures adopted pursuant to this Section 8.2 from time to time. The
Trustees may retain from the net profits such amount as they may deem
necessary to pay the liabilities and expenses of the Trust, to meet
obligations of the Trust, and as they may deem desirable to use in the
conduct of the affairs of the Trust or to retain for future requirements
or extensions of the business.
8.3. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article VIII, the
Trustees may prescribe, in their absolute discretion, such other bases and
times for determining the net income of the Trust, the allocation of
income of the Trust, the Book Capital Account balance of each Holder, or
the payment of distributions to the Holders as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act
or any order of exemption issued by the Commission or with the Code.
ARTICLE IX
Holders
-------
9.1. Rights of Holders. The ownership of the Trust
Property and the right to conduct any business described herein are vested
exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests
and they shall have no power or right to call for any partition or
division of any Trust Property.
9.2. Meetings of Holders. Meetings of Holders may be
called at any time by a majority of the Trustees and shall be called by
any Trustee upon written request of Holders holding, in the aggregate, not
less than 10% of the Interests, such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall
be held within or without the State of New York and within or without the
United States of America on such day and at such time as the Trustees
shall designate. Holders of one-third of the Interests, present in person
or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other
applicable law, this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote of the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the
Holders present, either in person or by proxy, at such meeting constitutes
the action of the Holders, unless a greater number of affirmative votes is
required by the 1940 Act, other applicable law, this Declaration or the
15
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By-Laws of the Trust. All or any one of more Holders may participate in a
meeting of Holders by means of a conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
9.3. Notice of Meetings. Notice of each meeting of
Holders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Holder, at its registered address,
mailed at least 10 days and not more than 60 days before the meeting.
Notice of any meeting may be waived in writing by any Holder either before
or after such meeting. The attendance of a Holder at a meeting shall
constitute a waiver of notice of such meeting except in the situation in
which a Holder attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting was not
lawfully called or convened. At any meeting, any business properly before
the meeting may be considered whether or not stated in the notice of the
meeting. Any adjourned meeting may be held as adjourned without further
notice.
9.4. Record Date for Meetings, Distributions, etc.
For the purpose of determining the Holders who are entitled to notice of
and to vote or act at any meeting, including any adjournment thereof, or
to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Holders or the payment of any
distribution or the taking of any other action, as the case may be, as a
record date for the determination of the Persons to be treated as Holders
for such purpose. If the Trustees do not, prior to any meeting of the
Holders, so fix a record date, then the date of mailing notice of the
meeting shall be the record date.
9.5. Proxies, etc. At any meeting of Holders, any
Holder entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as
the Secretary may direct, for verification prior to the time at which such
vote is to be taken. A proxy may be revoked by a Holder at any time
before it has been exercised by placing on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct,
a later dated proxy or written revocation. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of the
Trust or of one or more Trustees or of one or more officers of the Trust.
Only Holders on the record date shall be entitled to vote. Each such
Holder shall be entitled to a vote proportionate to its Interest. When an
Interest is held jointly by several Persons, any one of them may vote at
any meeting in person or by proxy in respect of such Interest, but if more
than one of them is present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to
be cast, such vote shall not be received in respect of such Interest. A
proxy purporting to be executed by or on behalf of a Holder shall be
16
<PAGE>
deemed valid unless challenged at or prior to its exercise, and the burden
of proving invalidity shall rest on the challenger. No proxy shall be
valid after one year from the date of execution, unless a longer period is
expressly stated in such proxy. The Trust may also permit a Holder to
authorize and empower individuals named as proxies on any form of proxy
solicited by the Trustees to vote that Holder's Interest on any matter by
recording his voting instructions on any recording device maintained for
that purpose by the Trust or its agent, provided the Holder complies with
such procedures as the Trustees may designate to be necessary or
appropriate to determine the authenticity of the voting instructions so
recorded; such instructions shall be deemed to constitute a written proxy
signed by the Holder and delivered to the Trust and shall be deemed to be
dated as of the date such instructions were transmitted, and the Holder
shall be deemed to have approved and ratified all actions taken by such
proxies in accordance with the voting instructions so recorded.
9.6. Reports. The Trustees shall cause to be prepared
and furnished to each Holder, at least annually as of the end of each
Fiscal Year, a report of operations containing a balance sheet and a
statement of income of the Trust prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
furnish to each Holder at least semi-annually interim reports of
operations containing an unaudited balance sheet as of the end of such
period and an unaudited statement of income for the period from the
beginning of the then-current Fiscal Year to the end of such period.
9.7. Inspection of Records. The books and records of
the Trust shall be open to inspection by Holders during normal business
hours for any purpose not harmful to the Trust.
9.8. Holder Action by Written Consent. Any action
which may be taken by Holders may be taken without a meeting if Holders
holding more than 50% of all Interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) consent to the action in writing and the written consents are
filed with the records of the meetings of Holders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Holders. Each
such written consent shall be executed by or on behalf of the Holder
delivering such consent and shall bear the date of such execution. No
such written consent shall be effective to take the action referred to
therein unless, within one year of the earliest dated consent, written
consents executed by a sufficient number of Holders to take such action
are filed with the records of the meetings of Holders.
9.9. Notices. Any and all communications, including
any and all notices to which any Holder may be entitled, shall be deemed
duly served or given if mailed, postage prepaid, addressed to a Holder at
its last known address as recorded on the register of the Trust.
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ARTICLE X
Duration; Termination;
Amendment; Mergers; Etc.
-------------------------
10.1. Duration. Subject to possible termination or
dissolution in accordance with the provisions of Section 10.2 and Section
10.3 hereof, respectively, the Trust created hereby shall continue until
the expiration of 20 years after the death of the last survivor of the
initial Trustees named herein and the following named persons:
Name Address Birth
---- ------- -----
Cassius Marcellus 742 Old Dublin Road November 9, 1990
Corneliu Clay Hancock, NH 03449
1308 Rhodes Street September 17, 1990
Sara Briggs Sullivan Dubois, WY 82513
Myles Bailey Rawson Winhall Hollow Road May 13, 1990
R.R. #1, Box 178B
Bondville, VT 05340
Zeben Curtis Kopchak Box 1126 October 31, 1989
Cordova, AK 99574
Landon Harris Clay 742 Old Dublin Road February 15, 1989
Hancock, NH 03449
Kelsey Ann Sullivan 1308 Rhodes Street May 1, 1988
Dubois, WY 82513
Carter Allen Rawson Winhall Hollow Road January 28, 1988
R.R. #1, Box 178B
Bondville, VT 05340
Obadiah Barclay Kopchak Box 1126 August 29, 1987
Cordova, AK 99574
Richard Tubman Clay 742 Old Dublin Road April 12, 1987
Hancock, NH 03449
Thomas Moragne Clay 742 Old Dublin Road April 11, 1985
Hancock, NH 03449
Zachariah Bishop Kopchak Box 1126 January 11, 1985
Cordova, AK 99574
Sager Anna Kopchak Box 1126 May 22, 1983
Cordova, AK 99574
10.2. Termination.
-----------
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(a) The Trust may be terminated (i) by the
affirmative vote of Holders of not less than two-thirds of all Interests
at any meeting of Holders or by an instrument in writing without a
meeting, executed by a majority of the Trustees and consented to by
Holders of not less than two-thirds of all Interests, or (ii) by the
Trustees by written notice to the Holders. Upon any such termination,
(i) the Trust shall carry on no business
except for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind
up the affairs of the Trust and all of the powers of the
Trustees under this Declaration shall continue until the
affairs of the Trust have been wound up, including the
power to fulfill or discharge the contracts of the Trust,
collect the assets of the Trust, sell, convey, assign,
exchange or otherwise dispose of all or any part of the
Trust Property to one or more Persons at public or
private sale for consideration which may consist in whole
or in part of cash, securities or other property of any
kind, discharge or pay the liabilities of the Trust, and
do all other acts appropriate to liquidate the business
of the Trust; provided that any sale, conveyance,
assignment, exchange or other disposition of all or
substantially all the Trust Property shall require
approval of the principal terms of the transaction and
the nature and amount of the consideration by the vote of
Holders holding more than 50% of all Interests; and
(iii) after paying or adequately
providing for the payment of all liabilities, and upon
receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection,
the Trustees shall distribute the remaining Trust
Property, in cash or in kind or partly each, among the
Holders according to their respective rights as set forth
in the procedures established pursuant to Section 8.2
hereof.
(b) Upon termination of the Trust and
distribution to the Holders as herein provided, a majority of the Trustees
shall execute and file with the records of the Trust an instrument in
writing setting forth the fact of such termination and distribution. Upon
termination of the Trust, the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and interests
of all Holders shall thereupon cease.
10.3. Dissolution. Upon the bankruptcy of any Holder,
or upon the Redemption of any Interest, the Trust shall be dissolved
effective 120 days after the event. However, the Holders (other than such
bankrupt or redeeming Holder) may, by a unanimous affirmative vote at any
meeting of such Holders or by an instrument in writing without a meeting
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executed by a majority of the Trustees and consented to by all such
Holders, agree to continue the business of the Trust even if there has
been such a dissolution.
10.4. Amendment Procedure.
-------------------
(a) This Declaration may be amended by the
vote of Holders of more than 50% of all Interests at any meeting of
Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all Interests. Notwithstanding any other provision hereof, this
Declaration may be amended by an instrument in writing executed by a
majority of the Trustees, and without the vote or consent of Holders, for
any one or more of the following purposes: (i) to change the name of the
Trust, (ii) to supply any omission, or to cure, correct or supplement any
ambiguous, defective or inconsistent provision hereof, (iii) to conform
this Declaration to the requirements of applicable federal law or
regulations or the requirements of the applicable provisions of the Code,
(iv) to change the state or other jurisdiction designated herein as the
state or other jurisdiction whose law shall be the governing law hereof,
(v) to effect such changes herein as the Trustees find to be necessary or
appropriate (A) to permit the filing of this Declaration under the law of
such state or other jurisdiction applicable to trusts or voluntary
associations, (B) to permit the Trust to elect to be treated as a
"regulated investment company" under the applicable provisions of the
Code, or (C) to permit the transfer of Interests (or to permit the
transfer of any other beneficial interest in or share of the Trust,
however denominated), (vi) in conjunction with any amendment contemplated
by the foregoing clause (iv) or the foregoing clause (v) to make any and
all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (v) or the foregoing clause (vi) to be
conclusively evidenced by the execution of any such amendment by a
majority of the Trustees, and (vii) change, modify or rescind any
provision of this Declaration provided such change, modification or
rescission is found by the Trustees to be necessary or appropriate and to
not have a materially adverse effect on the financial interests of the
Holders, any such finding to be conclusively evidenced by the execution of
any such amendment by a majority of the Trustees; provided, however, that
unless effected in compliance with the provisions of Section 10.4(b)
hereof, no amendment otherwise authorized by this sentence may be made
which would reduce the amount payable with respect to any Interest upon
liquidation of the Trust and; provided, further, that the Trustees shall
not be liable for failing to make any amendment permitted by this Section
10.4(a).
(b) No amendment may be made under
Section 10.4(a) hereof which would change any rights with respect to any
Interest by reducing the amount payable thereon upon liquidation of the
Trust, except with the vote or consent of Holders of two-thirds of all
Interests.
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(c) A certification in recordable form
executed by a majority of the Trustees setting forth an amendment and
reciting that it was duly adopted by the Holders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable form,
and executed by a majority of the Trustees, shall be conclusive evidence
of such amendment when filed with the records of the Trust.
Notwithstanding any other provision hereof, until such
time as Interests are first sold, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the
Trustees at any meeting of Trustees or by an instrument executed by a
majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The
Trust may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property, including good will, upon such
terms and conditions and for such consideration when and as authorized at
any meeting of Holders called for such purpose by a Majority Interests
Vote, and any such merger, consolidation, sale, lease or exchange shall be
deemed for all purposes to have been accomplished under and pursuant to
the statutes of the State of New York.
10.6. Incorporation. Upon a Majority Interests Vote,
the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the law of any jurisdiction or a trust,
partnership, association or other organization to take over the Trust
Property or to carry on any business in which the Trust directly or
indirectly has any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, partnership, association or other
organization in exchange for the equity interests thereof or otherwise,
and to lend money to, subscribe for the equity interests of, and enter
into any contract with any such corporation, trust, partnership,
association or other organization, or any corporation, trust, partnership,
association or other organization in which the Trust holds or is about to
acquire equity interests. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and
to the extent permitted by law. Nothing contained herein shall be
construed as requiring approval of the Holders for the Trustees to
organize or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Trust Property to one or more of such
organizations or entities.
ARTICLE XI
Miscellaneous
-------------
11.1. Certificate of Designation; Agent for Service of
Process. The Trust shall file, with the Department of State of the State
of New York, a certificate, in the name of the Trust and executed by an
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officer of the Trust, designating the Secretary of State of the State of
New York as an agent upon whom process in any action or proceeding against
the Trust may be served.
11.2. Governing Law. This Declaration is executed by
the Trustees and delivered in the State of New York and with reference to
the law thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
in accordance with the law of the State of New York and reference shall be
specifically made to the trust law of the State of New York as to the
construction of matters not specifically covered herein or as to which an
ambiguity exists.
11.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be
deemed to be an original, and such counterparts, together, shall
constitute one and the same instrument, which shall be sufficiently
evidenced by any one such original counterpart.
11.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust or of
any recording office in which this Declaration may be recorded, appears to
be a Trustee hereunder, certifying to: (a) the number or identity of
Trustees or Holders, (b) the due authorization of the execution of any
instrument or writing, (c) the form of any vote passed at a meeting of
Trustees or Holders, (d) the fact that the number of Trustees or Holders
present at any meeting or executing any written instrument satisfies the
requirements of this Declaration, (e) the form of any By-Laws adopted by
or the identity of any officer elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs
of the Trust, shall be conclusive evidence as to the matters so certified
in favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict With Law or Regulations.
----------------------------------------------
(a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with the 1940 Act, or
with other applicable law and regulations, the conflicting provision shall
be deemed never to have constituted a part of this Declaration; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration
shall be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in any
other jurisdiction or any other provision of this Declaration in any
jurisdiction.
22
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IN WITNESS WHEREOF, the undersigned have executed this
instrument as of the day and year first above written.
/s/James G. Baur
-------------------------------
JAMES G. BAUR, as Trustee and
not individually
/s/H. Day Brigham, Jr.
-------------------------------
H. DAY BRIGHAM, JR., as Trustee and
not individually
/s/James B. Hawkes
-------------------------------
JAMES B. HAWKES, as Trustee and
not individually
23
<PAGE>
SHORT-TERM INCOME PORTFOLIO
(formerly called Short-Term Global Income Portfolio)
AMENDMENT TO DECLARATION OF TRUST
February 23, 1994
AMENDMENT, made February 23, 1994 to the Declaration of Trust
made May 1, 1992 (hereinafter called the "Declaration") of Short-Term
Global Income Portfolio, a New York trust (hereinafter called the "Trust")
by the undersigned, being at least a majority of the Trustees of the Trust
in office on February 23, 1994.
WHEREAS, Section 10.4 of Article X of the Declaration empowers a
majority of the Trustees of the Trust to amend the Declaration without the
vote or consent of Holders to change the name of the Trust;
NOW THEREFORE, the undersigned Trustees, do hereby amend the
Declaration in the following manner:
1. The caption at the head of the Declaration is hereby amended
to read as follows:
SHORT-TERM INCOME PORTFOLIO
2. Section 1.1 of Article I of the Declaration is hereby amended
to read as follows:
ARTICLE I
NAME
1.1 NAME. The name of the trust created hereby (the "Trust")
shall be Short-Term Income Portfolio and so far as may be practicable the
Trustees shall conduct the Trusts's activities, execute all documents and
sue or be sued under that name, which name (and the work "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not
individually, and shall not refer to the officers, employees, agents or
independent contractors of the Trust or holders of interests in the Trust.
<PAGE>
IN WITNESS WHEREOF, the undersigned Trustees have executed this
instrument this 23rd day of February, 1994.
/s/Landon T. Clay /s/Samuel L. Hayes, III
----------------- -----------------------
LANDON T. CLAY SAMUEL L. HAYES, III
/s/Donald R. Dwight /s/Norton H. Reamer
------------------- ------------------------
DONALD R. DWIGHT NORTON H. REAMER
/s/James B. Hawkes /s/John L. Thorndike
------------------- -------------------------
JAMES B. HAWKES JOHN L. THORNDIKE
/s/Jack L. Treynor
---------------------------
JACK L. TREYNOR
- 2 -
<PAGE>
STRATEGIC INCOME PORTFOLIO
(formerly called Short-Term Income Portfolio)
AMENDMENT TO DECLARATION OF TRUST
March 1, 1995
AMENDMENT, made March 1, 1995 to the Declaration of Trust made
May 1, 1992, as amended February 23, 1994, (hereinafter called the
"Declaration") of Short-Term Income Portfolio, a New York trust
(hereinafter called the "Trust"), by the undersigned, being at least a
majority of the Trustees of the Trust in office on March 1, 1995.
WHEREAS, Section 10.4 of Article X of the Declaration empowers a
majority of the Trustees of the Trust to amend the Declaration without the
vote or consent of Holders to change the name of the Trust;
NOW THEREFORE, the undersigned Trustees, do hereby amend the
Declaration in the following manner:
1. The caption at the head of the Declaration is hereby amended
to read as follows:
STRATEGIC INCOME PORTFOLIO
2. Section 1.1 of Article I of the Declaration is hereby amended
to read as follows:
ARTICLE I
NAME
1.1 NAME. The name of the trust created hereby (the "Trust")
shall be Strategic Income Portfolio and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not
individually, and shall not refer to the officers, employees, agents or
independent contractors of the Trust or holders of interests in the Trust.
IN WITNESS WHEREOF, the undersigned Trustees have executed this
instrument as of this 1st day of March, 1995.
/s/ Landon T. Clay
---------------------- -----------------------
Landon T. Clay Samuel L. Hayes, III
/s/ Donald R. Dwight /s/ Norton H. Reamer
---------------------- -----------------------
Donald R. Dwight Norton H. Reamer
<PAGE>
/s/ James B. Hawkes /s/ John L. Thorndike
---------------------- -----------------------
James B. Hawkes John L. Thorndike
/s/ Jack L. Treynor
-----------------------
Jack L. Treynor
- 2 -
<PAGE>
SHORT-TERM GLOBAL INCOME PORTFOLIO
____________________________
BY-LAWS
As Adopted May 1, 1992
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- Meetings of Holders . . . . . . . . . . . . . . . . . . 1
Section 1.1 Records at Holder Meetings . . . . . . . . 1
Section 1.2 Inspectors of Election . . . . . . . . . . 1
ARTICLE II -- Officers . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Officers of the Trust . . . . . . . . . . . 2
Section 2.2 Election and Tenure . . . . . . . . . . . . 2
Section 2.3 Removal of Officers . . . . . . . . . . . . 2
Section 2.4 Bonds and Surety . . . . . . . . . . . . . 2
Section 2.5 Chairman, President and Vice President . . 2
Section 2.6 Secretary . . . . . . . . . . . . . . . . . 3
Section 2.7 Treasurer . . . . . . . . . . . . . . . . . 3
Section 2.8 Other Officers and Duties . . . . . . . . . 3
ARTICLE III -- Miscellaneous . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Depositories . . . . . . . . . . . . . . . 4
Section 3.2 Signatures . . . . . . . . . . . . . . . . 4
Section 3.3 Seal . . . . . . . . . . . . . . . . . . . . 4
Section 3.4 Indemnification . . . . . . . . . . . . . . 4
Section 3.5 Distribution Disbursing Agents and the
Like . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV -- Regulations; Amendment of By-Laws . . . . . . . . . . . 5
Section 4.1 Regulations . . . . . . . . . . . . . . . . 5
Section 4.2 Amendment and Repeal of By-Laws . . . . . . 5
i
<PAGE>
BY-LAWS
OF
SHORT-TERM GLOBAL INCOME PORTFOLIO
------------------------
These By-Laws are made and adopted pursuant to Section
2.7 of the Declaration of Trust establishing SHORT-TERM GLOBAL INCOME
PORTFOLIO (the "Trust"), dated as of May 1, 1992, as from time to time
amended (the "Declaration"). All words and terms capitalized in these
By-Laws shall have the meaning or meanings set forth for such words or
terms in the Declaration.
ARTICLE I
Meetings of Holders
-------------------
Section 1.1. Records at Holder Meetings. At each
meeting of the Holders there shall be open for inspection the minutes of
the last previous meeting of Holders of the Trust and a list of the
Holders of the Trust, certified to be true and correct by the Secretary or
other proper agent of the Trust, as of the record date of the meeting.
Such list of Holders shall contain the name of each Holder in alphabetical
order and the address and Interest owned by such Holder on such record
date.
Section 1.2. Inspectors of Election. In advance of any
meeting of the Holders, the Trustees may appoint Inspectors of Election to
act at the meeting or any adjournment thereof. If Inspectors of Election
are not so appointed, the chairman, if any, of any meeting of the Holders
may, and on the request of any Holder or his proxy shall, appoint
Inspectors of Election. The number of Inspectors of Election shall be
either one or three. If appointed at the meeting on the request of one or
more Holders or proxies, a Majority Interests Vote shall determine whether
one or three Inspectors of Election are to be appointed, but failure to
allow such determination by the Holders shall not affect the validity of
the appointment of Inspectors of Election. In case any individual
appointed as an Inspector of Election fails to appear or fails or refuses
to so act, the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at the meeting by the
individual acting as chairman of the meeting. The Inspectors of Election
shall determine the Interest owned by each Holder, the Interests
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents,
shall hear and determine all challenges and questions in any way arising
in connection with the right to vote, shall count and tabulate all votes
or consents, shall determine the results, and shall do such other acts as
may be proper to conduct the election or vote with fairness to all
Holders. If there are three Inspectors of Election, the decision, act or
certificate of a majority is effective in all respects as the decision,
act or certificate of all. On request of the chairman, if any, of the
meeting, or of any Holder or its proxy, the Inspectors of Election shall
make a report in writing of any challenge or question or matter determined
by them and shall execute a certificate of any facts found by them.
<PAGE>
ARTICLE II
Officers
--------
Section 2.1. Officers of the Trust. The officers of the
Trust shall consist of a Chairman, if any, a President, a Secretary, a
Treasurer and such other officers or assistant officers, including Vice
Presidents, as may be elected by the Trustees. Any two or more of the
offices may be held by the same individual. The Trustees may designate a
Vice President as an Executive Vice President and may designate the order
in which the other Vice Presidents may act. The Chairman shall be a
Trustee, but no other officer of the Trust, including the President, need
be a Trustee.
Section 2.2. Election and Tenure. At the initial
organization meeting and thereafter at each annual meeting of the
Trustees, the Trustees shall elect the Chairman, if any, the President,
the Secretary, the Treasurer and such other officers as the Trustees shall
deem necessary or appropriate in order to carry out the business of the
Trust. Such officers shall hold office until the next annual meeting of
the Trustees and until their successors have been duly elected and
qualified. The Trustees may fill any vacancy in office or add any
additional officer at any time.
Section 2.3. Removal of Officers. Any officer may be
removed at any time, with or without cause, by action of a majority of the
Trustees. This provision shall not prevent the making of a contract of
employment for a definite term with any officer and shall have no effect
upon any cause of action which any officer may have as a result of removal
in breach of a contract of employment. Any officer may resign at any time
by notice in writing signed by such officer and delivered or mailed to the
Chairman, if any, the President or the Secretary, and such resignation
shall take effect immediately, or at a later date according to the terms
of such notice in writing.
Section 2.4. Bonds and Surety. Any officer may be
required by the Trustees to be bonded for the faithful performance of his
duties in such amount and with such sureties as the Trustees may
determine.
Section 2.5. Chairman, President and Vice Presidents.
The Chairman, if any, shall, if present, preside at all meetings of the
Holders and of the Trustees and shall exercise and perform such other
powers and duties as may be from time to time assigned to him by the
Trustees. Subject to such supervisory powers, if any, as may be given by
the Trustees to the Chairman, if any, the President shall be the chief
executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the Holders and, in the absence of the
Chairman, the President shall preside at all meetings of the Trustees.
The President shall be, ex officio, a member of all standing committees of
Trustees. Subject to the direction of the Trustees, the President shall
have the power, in the name and on behalf of the Trust, to execute any and
all loan documents, contracts, agreements, deeds, mortgages and other
<PAGE>
instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the President
shall have full authority and power to attend, to act and to vote, on
behalf of the Trust, at any meeting of any business organization in which
the Trust holds an interest, or to confer such powers upon any other
person, by executing any proxies duly authorizing such person. The
President shall have such further authorities and duties as the Trustees
shall from time to time determine. In the absence or disability of the
President, the Vice Presidents in order of their rank or the Vice
President designated by the Trustees, shall perform all of the duties of
the President, and when so acting shall have all the powers of and be
subject to all of the restrictions upon the President. Subject to the
direction of the President, each Vice President shall have the power in
the name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing,
and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees or by the President.
Section 2.6. Secretary. The Secretary shall keep the
minutes of all meetings of, and record all votes of, Holders, Trustees and
the Executive Committee, if any. The results of all actions taken at a
meeting of the Trustees, or by written consent of the Trustees, shall be
recorded by the Secretary. The Secretary shall be custodian of the seal
of the Trust, if any, and (and any other person so authorized by the
Trustees) shall affix the seal or, if permitted, a facsimile thereof, to
any instrument executed by the Trust which would be sealed by a New York
corporation executing the same or a similar instrument and shall attest
the seal and the signature or signatures of the officer or officers
executing such instrument on behalf of the Trust. The Secretary shall
also perform any other duties commonly incident to such office in a New
York corporation, and shall have such other authorities and duties as the
Trustees shall from time to time determine.
Section 2.7. Treasurer. Except as otherwise directed by
the Trustees, the Treasurer shall have the general supervision of the
monies, funds, securities, notes receivable and other valuable papers and
documents of the Trust, and shall have and exercise under the supervision
of the Trustees and of the President all powers and duties normally
incident to his office. The Treasurer may endorse for deposit or
collection all notes, checks and other instruments payable to the Trust or
to its order and shall deposit all funds of the Trust as may be ordered by
the Trustees or the President. The Treasurer shall keep accurate account
of the books of the Trust's transactions which shall be the property of
the Trust, and which together with all other property of the Trust in his
possession, shall be subject at all times to the inspection and control of
the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall
also be the principal financial officer of the Trust. The Treasurer shall
have such other duties and authorities as the Trustees shall from time to
time determine. Notwithstanding anything to the contrary herein
contained, the Trustees may authorize the Investment Adviser or the
Administrator to maintain bank accounts and deposit and disburse funds on
behalf of the Trust.
Section 2.8. Other Officers and Duties. The Trustees
may elect such other officers and assistant officers as they shall from
time to time determine to be necessary or desirable in order to conduct
<PAGE>
the business of the Trust. Assistant officers shall act generally in the
absence of the officer whom they assist and shall assist that officer in
the duties of his office. Each officer, employee and agent of the Trust
shall have such other duties and authorities as may be conferred upon him
by the Trustees or delegated to him by the President.
ARTICLE III
Miscellaneous
-------------
Section 3.1. Depositories. The funds of the Trust shall
be deposited in such depositories as the Trustees shall designate and
shall be drawn out on checks, drafts or other orders signed by such
officer, officers, agent or agents (including the Investment Adviser or
the Administrator) as the Trustees may from time to time authorize.
Section 3.2. Signatures. All contracts and other
instruments shall be executed on behalf of the Trust by such officer,
officers, agent or agents as provided in these By-Laws or as the Trustees
may from time to time by resolution provide.
Section 3.3. Seal. The seal of the Trust, if any, may
be affixed to any document, and the seal and its attestation may be
lithographed, engraved or otherwise printed on any document with the same
force and effect as if it had been imprinted and attested manually in the
same manner and with the same effect as if done by a New York corporation.
Section 3.4. Indemnification. Insofar as the
conditional advancing of indemnification monies under Section 5.4 of the
Declaration for actions based upon the 1940 Act may be concerned, such
payments will be made only on the following conditions: (i) the advances
must be limited to amounts used, or to be used, for the preparation or
presentation of a defense to the action, including costs connected with
the preparation of a settlement; (ii) advances may be made only upon
receipt of a written promise by, or on behalf of, the recipient to repay
the amount of the advance which exceeds the amount to which it is
ultimately determined that he is entitled to receive from the Trust by
reason of indemnification; and (iii) (a) such promise must be secured by a
surety bond, other suitable insurance or an equivalent form of security
which assures that any repayment may be obtained by the Trust without
delay or litigation, which bond, insurance or other form of security must
be provided by the recipient of the advance, or (b) a majority of a quorum
of the Trust's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of
readily available facts, that the recipient of the advance ultimately will
be found entitled to indemnification.
Section 3.5. Distribution Disbursing Agents and the
Like. The Trustees shall have the power to employ and compensate such
distribution disbursing agents, warrant agents and agents for the
reinvestment of distributions as they shall deem necessary or desirable.
Any of such agents shall have such power and authority as is delegated to
any of them by the Trustees.
ARTICLE IV
<PAGE>
Regulations; Amendment of By-Laws
---------------------------------
Section 4.1. Regulations. The Trustees may make such
additional rules and regulations, not inconsistent with these By-Laws, as
they may deem expedient concerning the sale and purchase of Interests of
the Trust.
Section 4.2. Amendment and Repeal of By-Laws. In
accordance with Section 2.7 of the Declaration, the Trustees shall have
the power to alter, amend or repeal the By-Laws or adopt new By-Laws at
any time. Action by the Trustees with respect to the By-Laws shall be
taken by an affirmative vote of a majority of the Trustees. The Trustees
shall in no event adopt By-Laws which are in conflict with the
Declaration.
The Declaration refers to the Trustees as Trustees, but
not as individuals or personally; and no Trustee, officer, employee or
agent of the Trust shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the
Trust.
<PAGE>
SHORT-TERM INCOME PORTFOLIO
March 1, 1994
Short-Term Income Portfolio hereby adopts and agrees to become a party to
the attached Master Custodian Agreement between the Eaton Vance Hub
Portfolios and Investors Bank & Trust Company.
SHORT-TERM INCOME PORTFOLIO
BY: /s/James B. Hawkes
President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY: /s/ Michael Rogers
Title: Sr. Vice President
<PAGE>
MASTER CUSTODIAN AGREEMENT
between
EATON VANCE HUB PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be Held by It . . . . 3
3. Duties of the Custodian with Respect to
Property of the Trust . . . . . . . . . . . . . . . . . . . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . 4-7
C. Registration of Securities . . . . . . . . . . . . . . . . 7
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 8
E. Payments for Interests, or Increases in Interests,
in the Trust . .. . . . . . . . . . . . . . . . . . . . . 8
F. Investment and Availability of Federal Funds . . . . . . . 8
G. Collections . . . . . . . . . . . . . . . . . . . . . . 8-9
H. Payment of Trust Monies . . . . . . . . . . . . . . . 10-11
I. Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . 11-12
J. Payments for Repurchases or Redemptions
of Interests of the Trust . . . . . . . . . . . . . . . . 12
K. Appointment of Agents by the Custodian . . . . . . . . . . 12
L. Deposit of Trust Portfolio Securities in Securities
Systems . . . . . . . . . . . . . . . . . . . . . . 12-14
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . 15-17
N. Segregated Account . . . . . . . . . . . . . . . . . . . . 17
O. Ownership Certificates for Tax Purposes . . . . . . . . . 18
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 18
Q. Communications Relating to Trust Portfolio . . . . . . . 18
Securities
R. Exercise of Rights; Tender Offers . . . . . . . . . . 18-19
S. Depository Receipts . . . . . . . . . . . . . . . . . . . 19
T. Interest Bearing Call or Time Deposits . . . . . . . . . . 20
<PAGE>
U. Options, Futures Contracts and Foreign
Currency Transactions . . . . . . . . . . . . . . . 20-22
V. Actions Permitted Without Express Authority . . . . . . . 22
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . 22-23
5. Records and Miscellaneous Duties . . . . . . . . . . . . . 23-24
6. Opinion of Trust's Independent Public Accountants . . . . . . 24
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . 24
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . 24-25
9. Persons Having Access to Assets of the Trust . . . . . . . 25-26
10. Effective Period, Termination and Amendment;
Successor Custodian . . . . . . . . . . . . . . . . . . . 26-27
11. Interpretive and Additional Provisions . . . . . . . . . . . . 27
12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 27
14. Adoption of the Agreement by the Trust . . . . . . . . . . . . 28
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made between each investment company advised by
Boston Management and Research which has adopted this Agreement in the
manner provided herein and Investors Bank & Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under
the laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the
Investment Company Act of 1940 and has appointed the Bank to act as
Custodian of its property and to perform certain duties as its Agent, as
more fully hereinafter set forth; and
Whereas, the Bank is willing and able to act as each such
investment company's Custodian and Agent, subject to and in accordance
with the provisions hereof;
Now, therefore, in consideration of the premises and of the
mutual covenants and agreements herein contained, each such investment
company and the Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Trust" shall mean the investment company which has adopted
this Agreement.
(b) "Board" shall mean the board of trustees of the Trust.
(c) "The Depository Trust Company", a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(d) "Participants Trust Company", a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(e) "Approved Clearing Agency" shall mean any other domestic
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934 which acts as a
securities depository but only if the Custodian has received a certified
copy of a resolution of the Board approving such clearing agency as a
securities depository for the Trust.
(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
<PAGE>
United States and federal agency securities (i.e., as provided in Subpart
O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350,
and the book-entry regulations of federal agencies substantially in the
form of Subpart O).
(g) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in Rule 17f-4 under
the Investment Company Act of 1940 for foreign securities but only if the
Custodian has received a certified copy of a resolution of the Board
approving such depository or clearing agency as a foreign securities
depository for the Trust.
(h) "Approved Book-Entry System for Commercial Paper" shall mean
a system maintained by the Custodian or by a subcustodian employed
pursuant to Section 2 hereof for the holding of commercial paper in
book-entry form but only if the Custodian has received a certified copy of
a resolution of the Board approving the participation by the Trust in such
system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this
Agreement upon receipt of written or facsimile instructions signed by such
one or more person or persons as the Board shall have from time to time
authorized to give the particular class of instructions in question.
Different persons may be authorized to give instructions for different
purposes. A certified copy of a resolution of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of
any such person to act and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instructions may be
general or specific in terms and, where appropriate, may be standing
instructions. Unless the resolution delegating authority to any person or
persons to give a particular class of instructions specifically requires
that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class,
the Custodian shall be under no obligation to question the right of the
person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall
cause all oral instructions to be confirmed in writing. The Trust
authorizes the Custodian to tape record any and all telephonic or other
oral instructions given to the Custodian. Upon receipt of a certificate
signed by two officers of the Trust as to the authorization by the
President and the Treasurer of the Trust accompanied by a detailed
description of the communication procedures approved by the President and
the Treasurer of the Trust, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Trust and the
Custodian are satisfied that such procedures afford adequate safeguards
for the Trust's assets. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of
securities made by or for the Trust, the Custodian may take cognizance of
-2-
<PAGE>
the provisions of the governing documents and registration statement of
the Trust as the same may from time to time be in effect (and resolutions
or proceedings of the holders of interests in the Trust or the Board),
but, nevertheless, except as otherwise expressly provided herein, the
Custodian may assume unless and until notified in writing to the contrary
that so-called proper instructions received by it are not in conflict with
or in any way contrary to any provisions of such governing documents and
registration statement, or resolutions or proceedings of the holders of
interests in the Trust or the Board.
(j) The term "Vote" when used with respect to the Board or the
Holders of Interests in the Trust shall include a vote, resolution,
consent, proceeding and other action taken by the Board or Holders in
accordance with the Declaration of Trust or By-Laws of the Trust.
2. Employment of Custodian and Property to be Held by It
The Trust hereby appoints and employs the Bank as its Custodian
and Agent in accordance with and subject to the provisions hereof, and the
Bank hereby accepts such appointment and employment. The Trust agrees to
deliver to the Custodian all securities, participation interests, cash and
other assets owned by it, and all payments of income, payments of
principal and capital distributions and adjustments received by it with
respect to all securities and participation interests owned by the Trust
from time to time, and the cash consideration received by it from time to
time in exchange for an interest in the Trust or for an increase in such
an interest. The Custodian shall not be responsible for any property of
the Trust held by the Trust and not delivered by the Trust to the
Custodian. The Trust will also deliver to the Bank from time to time
copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement
agent, together with such resolutions, and other proceedings of the Trust
as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more
subcustodians to perform such acts and services upon such terms and
conditions as shall be approved from time to time by the Board. Any such
subcustodian so employed by the Custodian shall be deemed to be the agent
of the Custodian, and the Custodian shall remain primarily responsible for
the securities, participation interests, moneys and other property of the
Trust held by such subcustodian. Any foreign subcustodian shall be a bank
or trust company which is an eligible foreign custodian within the meaning
of Rule 17f-5 under the Investment Company Act of 1940, and the foreign
custody arrangements shall be approved by the Board and shall be in
accordance with and subject to the provisions of said Rule. For the
purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the
Custodian under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Trust
-3-
<PAGE>
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Trust and on behalf of the Trust
shall from time to time receive delivery of Trust property
for safekeeping. The Custodian shall hold, earmark and
segregate on its books and records for the account of the
Trust all property of the Trust, including all securities,
participation interests and other assets of the Trust (1)
physically held by the Custodian, (2) held by any
subcustodian referred to in Section 2 hereof or by any agent
referred to in Paragraph K hereof, (3) held by or maintained
in The Depository Trust Company or in Participants Trust
Company or in an Approved Clearing Agency or in the Federal
Book-Entry System or in an Approved Foreign Securities
Depository, each of which from time to time is referred to
herein as a "Securities System", and (4) held by the
Custodian or by any subcustodian referred to in Section 2
hereof and maintained in any Approved Book-Entry System for
Commercial Paper.
B. Delivery of Securities The Custodian shall release and
deliver securities or participation interests owned by the
Trust held (or deemed to be held) by the Custodian or
maintained in a Securities System account or in an Approved
Book-Entry System for Commercial Paper account only upon
receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, and only
in the following cases:
1) Upon sale of such securities or participation
interests for the account of the Trust, but only
against receipt of payment therefor; if delivery
is made in Boston or New York City, payment
therefor shall be made in accordance with
generally accepted clearing house procedures or
by use of Federal Reserve Wire System procedures;
if delivery is made elsewhere payment therefor
shall be in accordance with the then current
"street delivery" custom or in accordance with
such procedures agreed to in writing from time to
time by the parties hereto; if the sale is
effected through a Securities System, delivery
and payment therefor shall be made in accordance
with the provisions of Paragraph L hereof; if the
sale of commercial paper is to be effected
through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor
shall be made in accordance with the provisions
of Paragraph M hereof; if the securities are to
be sold outside the United States, delivery may
be made in accordance with procedures agreed to
in writing from time to time by the parties
hereto; for the purposes of this subparagraph,
-4-
<PAGE>
the term "sale" shall include the disposition of
a portfolio security (i) upon the exercise of an
option written by the Trust and (ii) upon the
failure by the Trust to make a successful bid
with respect to a portfolio security, the
continued holding of which is contingent upon the
making of such a bid;
2) Upon the receipt of payment in connection with
any repurchase agreement or reverse repurchase
agreement relating to such securities and entered
into by the Trust;
3) To the depository agent in connection with tender
or other similar offers for portfolio securities
of the Trust;
4) To the issuer thereof or its agent when such
securities or participation interests are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or
other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant
to Section 2 hereof;
5) To the issuer thereof, or its agent, for transfer
into the name of the Trust or into the name of
any nominee of the Custodian or into the name or
nominee name of any agent appointed pursuant to
Paragraph K hereof or into the name or nominee
name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or
number of units; provided that, in any such case,
the new securities or participation interests are
to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2
hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom;
provided that the Custodian shall adopt such
procedures as the Trust from time to time shall
approve to ensure their prompt return to the
Custodian by the broker in the event the broker
elects not to accept them;
7) For exchange or conversion pursuant to any plan
of merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such securities, or pursuant to
provisions for conversion of such securities, or
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pursuant to any deposit agreement; provided that,
in any such case, the new securities and cash, if
any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2
hereof;
8) In the case of warrants, rights or similar
securities, the surrender thereof in connection
with the exercise of such warrants, rights or
similar securities, or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the
new securities and cash, if any, are to be
delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
9) For delivery in connection with any loans of
securities made by the Trust (such loans to be
made pursuant to the terms of the Trust's current
registration statement), but only against receipt
of adequate collateral as agreed upon from time
to time by the Custodian and the Trust, which may
be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities; except that in connection with
any securities loans for which collateral is to
be credited to the Custodian's account in the
book-entry system authorized by the U.S.
Department of Treasury, the Custodian will not be
held liable or responsible for the delivery of
securities loaned by the Trust prior to the
receipt of such collateral;
10) For delivery as security in connection with any
borrowings by the Trust requiring a pledge or
hypothecation of assets by the Trust (if then
permitted under circumstances described in the
current registration statement of the Trust),
provided, that the securities shall be released
only upon payment to the Custodian of the monies
borrowed, except that in cases where additional
collateral is required to secure a borrowing
already made, further securities may be released
for that purpose; upon receipt of proper
instructions, the Custodian may pay any such loan
upon redelivery to it of the securities pledged
or hypothecated therefor and upon surrender of
the note or notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of an interest in the
Trust in accordance with the provisions of
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Paragraph J hereof;
12) For delivery in accordance with the provisions of
any agreement between the Custodian (or a
subcustodian employed pursuant to Section 2
hereof) and a broker-dealer registered under the
Securities Exchange Act of 1934 and, if
necessary, the Trust, relating to compliance with
the rules of The Options Clearing Corporation or
of any registered national securities exchange,
or of any similar organization or organizations,
regarding deposit or escrow or other arrangements
in connection with options transactions by the
Trust;
13) For delivery in accordance with the provisions of
any agreement among the Trust, the Custodian (or
a subcustodian employed pursuant to Section 2
hereof), and a futures commissions merchant,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or of
any contract market or commodities exchange or
similar organization, regarding futures margin
account deposits or payments in connection with
futures transactions by the Trust;
14) For any other proper corporate purpose, but only
upon receipt of, in addition to proper
instructions, a certified copy of a resolution of
the Board specifying the securities to be
delivered, setting forth the purpose for which
such delivery is to be made, declaring such
purpose to be proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Trust
shall be registered in the name of the Trust or in the name
of any nominee of the Trust or of any nominee of the
Custodian, or in the name or nominee name of any agent
appointed pursuant to Paragraph K hereof, or in the name or
nominee name of any subcustodian employed pursuant to Section
2 hereof, or in the name or nominee name of The Depository
Trust Company or Participants Trust Company or Approved
Clearing Agency or Federal Book-Entry System or Approved
Book-Entry System for Commercial Paper; provided, that
securities are held in an account of the Custodian or of such
agent or of such subcustodian containing only assets of the
Trust or only assets held by the Custodian or such agent or
such subcustodian as a custodian or subcustodian or in a
fiduciary capacity for customers. All certificates for
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securities accepted by the Custodian or any such agent or
subcustodian on behalf of the Trust shall be in "street" or
other good delivery form or shall be returned to the selling
broker or dealer who shall be advised of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a
separate bank account or accounts in the name of the Trust,
subject only to draft or order by the Custodian acting in
pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Trust
other than cash maintained by the Trust in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian
for the Trust may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as the Custodian may in
its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall be approved in writing by two officers of the Trust.
Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be subject to withdrawal only
by the Custodian in that capacity.
E. Payments for Interests, or Increases in Interests, in the
Trust The Custodian shall make appropriate arrangements with
the Transfer Agent of the Trust to enable the Custodian to
make certain it promptly receives the cash or other
consideration due to the Trust for payment of interests in
the Trust, or increases in such interests, in accordance with
the governing documents and registration statement of the
Trust. The Custodian will provide prompt notification to the
Trust of any receipt by it of such payments.
F. Investment and Availability of Federal Funds Upon agreement
between the Trust and the Custodian, the Custodian shall,
upon the receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the
parties, invest in such securities and instruments as may be
set forth in such instructions on the same day as received
all federal funds received after a time agreed upon between
the Custodian and the Trust.
G. Collections The Custodian shall promptly collect all income
and other payments with respect to registered securities held
hereunder to which the Trust shall be entitled either by law
or pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect
to bearer securities if, on the date of payment by the
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issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the
Trust's custodian account. The Custodian shall do all things
necessary and proper in connection with such prompt
collections and, without limiting the generality of the
foregoing, the Custodian shall
1) Present for payment all coupons and other income
items requiring presentations;
2) Present for payment all securities which may
mature or be called, redeemed, retired or
otherwise become payable;
3) Endorse and deposit for collection, in the name
of the Trust, checks, drafts or other negotiable
instruments;
4) Credit income from securities maintained in a
Securities System or in an Approved Book-Entry
System for Commercial Paper at the time funds
become available to the Custodian; in the case of
securities maintained in The Depository Trust
Company funds shall be deemed available to the
Trust not later than the opening of business on
the first business day after receipt of such
funds by the Custodian.
The Custodian shall notify the Trust as soon as reasonably
practicable whenever income due on any security is not
promptly collected. In any case in which the Custodian
does not receive any due and unpaid income after it has
made demand for the same, it shall immediately so notify
the Trust in writing, enclosing copies of any demand
letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await
instructions from the Trust; the Custodian shall in no case
have any liability for any nonpayment of such income
provided the Custodian meets the standard of care set forth
in Section 8 hereof. The Custodian shall not be obligated
to take legal action for collection unless and until
reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock
dividends, rights and other items of like nature, and deal
with the same pursuant to proper instructions relative
thereto.
H. Payment of Trust Monies Upon receipt of proper instructions,
which may be continuing instructions when deemed appropriate
by the parties, the Custodian shall pay out monies of the
Trust in the following cases only:
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1) Upon the purchase of securities, participation
interests, options, futures contracts, forward
contracts and options on futures contracts
purchased for the account of the Trust but only
(a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer
of the Trust regarding the participation
interests to be purchased or
(iii)written confirmation of the purchase by the
Trust of the options, futures contracts, forward
contracts or options on futures contracts by the
Custodian (or by a subcustodian employed pursuant
to Section 2 hereof or by a clearing corporation
of a national securities exchange of which the
Custodian is a member or by any bank, banking
institution or trust company doing business in
the United States or abroad which is qualified
under the Investment Company Act of 1940 to act
as a custodian and which has been designated by
the Custodian as its agent for this purpose or by
the agent specifically designated in such
instructions as representing the purchasers of a
new issue of privately placed securities); (b) in
the case of a purchase effected through a
Securities System, upon receipt of the securities
by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c)
in the case of a purchase of commercial paper
effected through an Approved Book-Entry System
for Commercial Paper, upon receipt of the paper
by the Custodian or subcustodian in accordance
with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements
entered into between the Trust and another bank
or a broker-dealer, against receipt by the
Custodian of the securities underlying the
repurchase agreement either in certificate form
or through an entry crediting the Custodian's
segregated, non-proprietary account at the
Federal Reserve Bank of Boston with such
securities along with written evidence of the
agreement by the bank or broker-dealer to
repurchase such securities from the Trust; or (e)
with respect to securities purchased outside of
the United States, in accordance with written
procedures agreed to from time to time in writing
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<PAGE>
by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the
Trust as set forth in Paragraph B hereof;
3) When required for the reduction or redemption of
an interest in the Trust in accordance with the
provisions of Paragraph J hereof;
4) For the payment of any expense or liability
incurred by the Trust, including but not limited
to the following payments for the account of the
Trust: advisory fees, interest, taxes,
management compensation and expenses, accounting,
transfer agent and legal fees, and other
operating expenses of the Trust whether or not
such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For distributions or payment to Holders of
Interest in the Trust; and
6) For any other proper corporate purpose, but only
upon receipt of, in addition to proper
instructions, a certified copy of a resolution of
the Board, specifying the amount of such payment,
setting forth the purpose for which such payment
is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase
of securities for the account of the Trust is made by the
Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions signed by two
officers of the Trust to so pay in advance, the Custodian
shall be absolutely liable to the Trust for such securities
to the same extent as if the securities had been received by
the Custodian; except that in the case of a repurchase
agreement entered into by the Trust with a bank which is a
member of the Federal Reserve System, the Custodian may
transfer trusts to the account of such bank prior to the
receipt of (i) the securities in certificate form subject to
such repurchase agreement or (ii) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve
Bank of Boston or (iii) the safekeeping receipt, provided
that such securities have in fact been so transferred by
book-entry and the written repurchase agreement is received
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by the Custodian in due course; and except that if the
securities are to be purchased outside the United States,
payment may be made in accordance with procedures agreed to
in writing from time to time by the parties hereto.
J. Payments for Repurchases or Redemptions of Interests in the
Trust From such funds as may be available for the purpose,
but subject to any applicable resolutions of the Board and
the current procedures of the Trust, the Custodian shall,
upon receipt of written instructions from the Trust or from
the Trust's Transfer Agent, make funds and/or portfolio
securities available for payment to Holders of Interest in
the Trust who have caused the amount of their interests to be
reduced, or for their interest to be redeemed.
K. Appointment of Agents by the Custodian The Custodian may at
any time or times in its discretion appoint (and may at any
time remove) any other bank or trust company (provided such
bank or trust company is itself qualified under the
Investment Company Act of 1940 to act as a custodian or is
itself an eligible foreign custodian within the meaning of
Rule 17f-5 under said Act) as the agent of the Custodian to
carry out such of the duties and functions of the Custodian
described in this Section 3 as the Custodian may from time to
time direct; provided, however, that the appointment of any
such agent shall not relieve the Custodian of any of its
responsibilities or liabilities hereunder, and as between the
Trust and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent.
For the purposes of this Agreement, any property of the Trust
held by any such agent shall be deemed to be held by the
Custodian hereunder.
L. Deposit of Trust Portfolio Securities in Securities Systems
The Custodian may deposit and/or maintain securities owned by
the Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules
and regulations, and at all times subject to the following
provisions:
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(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2 keep
securities of the Trust in a Securities System provided
that such securities are maintained in a non-proprietary
account ("Account") of the Custodian or such subcustodian
in the Securities System which shall not include any assets
of the Custodian or such subcustodian or any other person
other than assets held by the Custodian or such
subcustodian as a fiduciary, custodian, or otherwise for
its customers.
(b) The records of the Custodian with respect to
securities of the Trust which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Trust, and the Custodian shall
be fully and completely responsible for maintaining a
recordkeeping system capable of accurately and currently
stating the Trust's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in
book-entry form for the account of the Trust only upon
(i) receipt of notice or advice from the Securities
System that such securities have been transferred to the
Account, and (ii) the making of any entry on the records
of the Custodian to reflect such payment and transfer for
the account of the Trust. The Custodian shall transfer
securities sold for the account of the Trust only upon
(i) receipt of notice or advice from the Securities
System that payment for such securities has been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer and payment for the account of the Trust. Copies
of all notices or advices from the Securities System of
transfers of securities for the account of the Trust
shall identify the Trust, be maintained for the Trust by
the Custodian and be promptly provided to the Trust at
its request. The Custodian shall promptly send to the
Trust confirmation of each transfer to or from the
account of the Trust in the form of a written advice or
notice of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the
account of the Trust on the next business day.
(d) The Custodian shall promptly send to the Trust any
report or other communication received or obtained by the
Custodian relating to the Securities System's accounting
system, system of internal accounting controls or
procedures for safeguarding securities deposited in the
Securities System; the Custodian shall promptly send to
the Trust any report or other communication relating to
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the Custodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Securities System; and the Custodian shall ensure that
any agent appointed pursuant to Paragraph K hereof or any
subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Trust and to the Custodian any
report or other communication relating to such agent's or
subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Securities System. The Custodian's books and records
relating to the Trust's participation in each Securities
System will at all times during regular business hours be
open to the inspection of the Trust's authorized
officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L
in the absence of receipt of a certificate of an officer
of the Trust that the Board has approved the use of a
particular Securities System; the Custodian shall also
obtain appropriate assurance from the officers of the
Trust that the Board has annually reviewed the continued
use by the Trust of each Securities System, and the Trust
shall promptly notify the Custodian if the use of a
Securities System is to be discontinued; at the request
of the Trust, the Custodian will terminate the use of any
such Securities System as promptly as practicable.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or subcustodians or of any of its or their
employees or from any failure of the Custodian or any
such agent or subcustodian to enforce effectively such
rights as it may have against the Securities System or
any other person; at the election of the Trust, it shall
be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if
and to the extent that the Trust has not been made whole
for any such loss or damage.
M. Deposit of Trust Commercial Paper in an Approved Book-Entry
System for Commercial Paper Upon receipt of proper
instructions with respect to each issue of direct issue
commercial paper purchased by the Trust, the Custodian may
deposit and/or maintain direct issue commercial paper owned
by the Trust in any Approved Book-Entry System for
Commercial Paper, in each case only in accordance with
applicable Securities and Exchange Commission rules,
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regulations, and no-action correspondence, and at all times
subject to the following provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2) keep
commercial paper of the Trust in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or
subcustodian on behalf of an issuer with which the
Custodian or subcustodian has entered into a book-entry
agreement and provided further that such paper is
maintained in a non-proprietary account ("Account") of
the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not
include any assets of the Custodian or such subcustodian
or any other person other than assets held by the
Custodian or such subcustodian as a fiduciary, custodian,
or otherwise for its customers.
(b) The records of the Custodian with respect to
commercial paper of the Trust which is maintained in an
Approved Book-Entry System for Commercial Paper shall
identify by book-entry each specific issue of commercial
paper purchased by the Trust which is included in the
Securities System and shall at all times during regular
business hours be open for inspection by authorized
officers, employees or agents of the Trust. The
Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately
and currently stating the Trust's holdings of commercial
paper maintained in each such System.
(c) The Custodian shall pay for commercial paper
purchased in book-entry form for the account of the Trust
only upon contemporaneous (i) receipt of notice or advice
from the issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Trust. The Custodian shall transfer such commercial
paper which is sold or cancel such commercial paper which
is redeemed for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer or redemption
and payment for the account of the Trust. Copies of all
notices, advices and confirmations of transfers of
commercial paper for the account of the Trust shall
identify the Trust, be maintained for the Trust by the
Custodian and be promptly provided to the Trust at its
request. The Custodian shall promptly send to the Trust
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confirmation of each transfer to or from the account of
the Trust in the form of a written advice or notice of
each such transaction, and shall furnish to the Trust
copies of daily transaction sheets reflecting each day's
transactions in the System for the account of the Trust
on the next business day.
(d) The Custodian shall promptly send to the Trust any
report or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System; the
Custodian shall promptly send to the Trust any report or
other communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
commercial paper deposited in any Approved Book-Entry
System for Commercial Paper; and the Custodian shall ensure
that any agent appointed pursuant to Paragraph K hereof or
any subcustodian employed pursuant to Section 2 hereof
shall promptly send to the Trust and to the Custodian any
report or other communication relating to such agent's or
subcustodian's internal accounting controls and procedures
for safeguarding securities deposited in any Approved
Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in
the absence of receipt of a certificate of an officer of
the Trust that the Board has approved the use of a
particular Approved Book-Entry System for Commercial Paper;
the Custodian shall also obtain appropriate assurance from
the officers of the Trust that the Board has annually
reviewed the continued use by the Trust of each Approved
Book-Entry System for Commercial Paper, and the Trust shall
promptly notify the Custodian if the use of an Approved
Book-Entry System for Commercial Paper is to be
discontinued; at the request of the Trust, the Custodian
will terminate the use of any such System as promptly as
practicable.
(f) The Custodian (or subcustodian, if the Approved
Book-Entry System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or
promissory notes whenever requested to do so by the Trust
or in the event of an electronic system failure which
impedes issuance, transfer or custody of direct issue
commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Trust
for any loss or damage to the Trust resulting from use of
any Approved Book-Entry System for Commercial Paper by
reason of any negligence, misfeasance or misconduct of the
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Custodian or any of its agents or subcustodians or of any
of its or their employees or from any failure of the
Custodian or any such agent or subcustodian to enforce
effectively such rights as it may have against the System,
the issuer of the commercial paper or any other person; at
the election of the Trust, it shall be entitled to be
subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial
paper or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Trust has not been made whole for any such loss or
damage.
N. Segregated Account The Custodian shall upon receipt of
proper instructions establish and maintain a segregated
account or accounts for and on behalf of the Trust, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by
the Custodian pursuant to Paragraph L hereof, (i) in
accordance with the provisions of any agreement among the
Trust, the Custodian and any registered broker-dealer (or any
futures commission merchant), relating to compliance with the
rules of the Options Clearing Corporation and of any
registered national securities exchange (or of the Commodity
Futures Trading Commission or of any contract market or
commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other
arrangements in connection with transactions by the Trust,
(ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or
written by the Trust or futures contracts or options thereon
purchased or sold by the Trust, (iii) for the purposes of
compliance by the Trust with the procedures required by
Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to proper instructions, a certificate signed
by two officers of the Trust, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt
of income or other payments with respect to securities of the
Trust held by it and in connection with transfers of
securities.
P. Proxies The Custodian shall, with respect to the securities
held by it hereunder, cause to be promptly delivered to the
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Trust all forms of proxies and all notices of meetings and
any other notices or announcements or other written
information affecting or relating to the securities, and upon
receipt of proper instructions shall execute and deliver or
cause its nominee to execute and deliver such proxies or
other authorizations as may be required. Neither the
Custodian nor its nominee shall vote upon any of the
securities or execute any proxy to vote thereon or give any
consent or take any other action with respect thereto (except
as otherwise herein provided) unless ordered to do so by
proper instructions.
Q. Communications Relating to Trust Portfolio Securities The
Custodian shall deliver promptly to the Trust all written
information (including, without limitation, pendency of call
and maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Trust and the
maturity of futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Trust. With respect to tender or exchange
offers, the Custodian shall deliver promptly to the Trust all
written information received by the Custodian from issuers
and other persons relating to the securities and
participation interests whose tender or exchange is sought
and from the party (or his agents) making the tender or
exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender
offers, similar offers to purchase or exercise rights
(including, without limitation, pendency of calls and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options and the maturity of futures
contracts) affecting or relating to securities and
participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for
promptly notifying the Trust of all such offers in accordance
with the standard of reasonable care set forth in Section 8
hereof. For all such offers for which the Custodian is
responsible as provided in this Paragraph R, the Trust shall
have responsibility for providing the Custodian with all
necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to
the issuer or trustee thereof, or to the agent of either,
warrants, puts, calls, rights or similar securities for the
purpose of being exercised or sold upon proper receipt
therefor and upon receipt of assurances satisfactory to the
Custodian that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon
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receipt of proper instructions, the Custodian shall timely
deposit securities upon invitations for tenders of securities
upon proper receipt therefor and upon receipt of assurances
satisfactory to the Custodian that the consideration to be
paid or delivered or the tendered securities are to be
returned to the Custodian or subcustodian employed pursuant
to Section 2 hereof. Notwithstanding any provision of this
Agreement to the contrary, the Custodian shall take all
necessary action, unless otherwise directed to the contrary
by proper instructions, to comply with the terms of all
mandatory or compulsory exchanges, calls, tenders,
redemptions, or similar rights of security ownership, and
shall thereafter promptly notify the Trust in writing of such
action.
S. Depository Receipts The Custodian shall, upon receipt of
proper instructions, surrender or cause to be surrendered
foreign securities to the depository used by an issuer of
American Depository Receipts or International Depository
Receipts (hereinafter collectively referred to as "ADRs") for
such securities, against a written receipt therefor
adequately describing such securities and written evidence
satisfactory to the Custodian that the depository has
acknowledged receipt of instructions to issue with respect to
such securities in the name of a nominee of the Custodian or
in the name or nominee name of any subcustodian employed
pursuant to Section 2 hereof, for delivery to the Custodian
or such subcustodian at such place as the Custodian or such
subcustodian may from time to time designate. The Custodian
shall, upon receipt of proper instructions, surrender ADRs to
the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written
evidence satisfactory to the Custodian that the issuer of the
ADRs has acknowledged receipt of instructions to cause its
depository to deliver the securities underlying such ADRs to
the Custodian or to a subcustodian employed pursuant to
Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall,
upon receipt of proper instructions, place interest bearing
fixed term and call deposits with the banking department of
such banking institution (other than the Custodian) and in
such amounts as the Trust may designate. Deposits may be
denominated in U.S. Dollars or other currencies. The
Custodian shall include in its records with respect to the
assets of the Trust appropriate notation as to the amount and
currency of each such deposit, the accepting banking
institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if
any, as may be forwarded to the Custodian by the banking
institution. Such deposits shall be deemed portfolio
securities of the Trust for the purposes of this Agreement,
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and the Custodian shall be responsible for the collection of
income from such accounts and the transmission of cash to and
from such accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodian shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered
broker-dealer and, if necessary, the Trust, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations, receive
and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a
security or securities index or other financial instrument
or index by the Trust; deposit and maintain in a segregated
account for the Trust, either physically or by book-entry
in a Securities System, securities subject to a covered
call option written by the Trust; and release and/or
transfer such securities or other assets only in accordance
with a notice or other communication evidencing the
expiration, termination or exercise of such covered option
furnished by the Options Clearing Corporation, the
securities or options exchange on which such covered option
is traded or such other organization as may be responsible
for handling such options transactions. The Custodian and
the broker-dealer shall be responsible for the sufficiency
of assets held in the Trust's segregated account in
compliance with applicable margin maintenance requirements.
2. Futures Contracts The Custodian shall, upon
receipt of proper instructions, receive and retain
confirmations and other documents, if any, evidencing the
purchase or sale of a futures contract or an option on a
futures contract by the Trust; deposit and maintain in a
segregated account, for the benefit of any futures
commission merchant, assets designated by the Trust as
initial, maintenance or variation "margin" deposits
(including mark-to-market payments) intended to secure the
Trust's performance of its obligations under any futures
contracts purchased or sold or any options on futures
contracts written by Trust, in accordance with the
provisions of any agreement or agreements among the Trust,
the Custodian and such futures commission merchant,
designed to comply with the rules of the Commodity Futures
Trading Commission and/or of any contract market or
commodities exchange or similar organization regarding such
margin deposits or payments; and release and/or transfer
assets in such margin accounts only in accordance with any
such agreements or rules. The Custodian and the futures
commission merchant shall be responsible for the
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sufficiency of assets held in the segregated account in
compliance with the applicable margin maintenance and
mark-to-market payment requirements.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot
and future delivery on behalf and for the account of the
Trust. Such transactions may be undertaken by the
Custodian or subcustodian with such banking or financial
institutions or other currency brokers, as set forth in
proper instructions. Foreign exchange contracts and
options shall be deemed to be portfolio securities of the
Trust; and accordingly, the responsibility of the Custodian
therefor shall be the same as and no greater than the
Custodian's responsibility in respect of other portfolio
securities of the Trust. The Custodian shall be
responsible for the transmittal to and receipt of cash from
the currency broker or banking or financial institution
with which the contract or option is made, the maintenance
of proper records with respect to the transaction and the
maintenance of any segregated account required in
connection with the transaction. The Custodian shall have
no duty with respect to the selection of the currency
brokers or banking or financial institutions with which the
Trust deals or for their failure to comply with the terms
of any contract or option. Without limiting the foregoing,
it is agreed that upon receipt of proper instructions and
insofar as funds are made available to the Custodian for
the purpose, the Custodian may (if determined necessary by
the Custodian to consummate a particular transaction on
behalf and for the account of the Trust) make free outgoing
payments of cash in the form of U.S. dollars or foreign
currency before receiving confirmation of a foreign
exchange contract or confirmation that the countervalue
currency completing the foreign exchange contract has been
delivered or received. The Custodian shall not be
responsible for any costs and interest charges which may be
incurred by the Trust or the Custodian as a result of the
failure or delay of third parties to deliver foreign
exchange; provided that the Custodian shall nevertheless be
held to the standard of care set forth in, and shall be
liable to the Trust in accordance with, the provisions of
Section 8.
V. Actions Permitted Without Express Authority The Custodian
may in its discretion, without express authority from the
Trust:
1) make payments to itself or others for minor
expenses of handling securities or other similar
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items relating to its duties under this
Agreement, provided, that all such payments shall
be accounted for by the Custodian to the
Treasurer of the Trust;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Trust,
checks, drafts and other negotiable instruments;
and
4) in general, attend to all nondiscretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of the
Trust except as otherwise directed by the Trust.
4. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be)
keep such books of account (including records showing the adjusted tax
costs of the Trust's portfolio securities) and render as at the close of
business on each day a detailed statement of the amounts received or paid
out and of securities received or delivered for the account of the Trust
during said day and such other statements, including a daily trial balance
and inventory of the Trust's portfolio securities; and shall furnish such
other financial information and data as from time to time requested by the
Treasurer or any executive officer of the Trust; and shall compute and
determine, as of the close of business of the New York Stock Exchange, or
at such other time or times as the Board may determine, the net asset
value of the Trust and the net asset value of each interest in the Trust,
such computations and determinations to be made in accordance with the
governing documents of the Trust and the votes and instructions of the
Board and of the investment adviser at the time in force and applicable,
and promptly notify the Trust and its investment adviser and such other
persons as the Trust may request of the result of such computation and
determination. In computing the net asset value the Custodian may rely
upon security quotations received by telephone or otherwise from sources
or pricing services designated by the Trust by proper instructions, and
may further rely upon information furnished to it by any authorized
officer of the Trust relative (a) to liabilities of the Trust not
appearing on its books of account, (b) to the existence, status and proper
treatment of any reserve or reserves, (c) to any procedures or policies
established by the Board regarding the valuation of portfolio securities
or other assets, and (d) to the value to be assigned to any bond, note,
debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interests or other asset or property for which
market quotations are not readily available. The Custodian shall also
compute and determine at such time or times as the Trust may designate the
portion of each item which has significance for a holder of an interest in
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the Trust in computing and determining its federal income tax liability
including, but not limited to, each item of income, expense and realized
and unrealized gain or loss of the Trust which is attributable for Federal
income tax purposes to each such holder.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating
to its activities and obligations under this Agreement in such manner as
will meet the obligations of the Trust under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable federal and state tax laws and any other law
or administrative rules or procedures which may be applicable to the
Trust. All books of account and records maintained by the Bank in
connection with the performance of its duties under this Agreement shall
be the property of the Trust, shall at all times during the regular
business hours of the Bank be open for inspection by authorized officers,
employees or agents of the Trust, and in the event of termination of this
Agreement shall be delivered to the Trust or to such other person or
persons as shall be designated by the Trust. Disposition of any account
or record after any required period of preservation shall be only in
accordance with specific instructions received from the Trust. The Bank
shall assist generally in the preparation of reports to holder of interest
in the Trust, to the Securities and Exchange Commission, including Form
N-SAR, and to others, audits of accounts, and other ministerial matters of
like nature; and, upon request, shall furnish the Trust's auditors with an
attested inventory of securities held with appropriate information as to
securities in transit or in the process of purchase or sale and with such
other information as said auditors may from time to time request. The
Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof,
and shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for
which it is responsible under this Agreement in such manner as the
Custodian shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. The Bank shall not disclose or use
any books or records it has prepared or maintained by reason of this
Agreement in any manner except as expressly authorized herein or directed
by the Trust, and the Bank shall keep confidential any information
obtained by reason of this Agreement.
6. Opinion of Trust's Independent Public Accountants
The Custodian shall take all reasonable action, as the Trust may
from time to time request, to enable the Trust to obtain from year to year
favorable opinions from the Trust's independent public accountants with
respect to its activities hereunder in connection with the preparation of
the Trust's registration statement and Form N-SAR or other periodic
reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
7. Compensation and Expenses of Bank
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The Bank shall be entitled to reasonable compensation for its
services as Custodian and Agent, as agreed upon from time to time between
the Trust and the Bank. The Bank shall be entitled to receive from the
Trust on demand reimbursement for its cash disbursements, expenses and
charges, including counsel fees, in connection with its duties as
Custodian and Agent hereunder, but excluding salaries and usual overhead
expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of
reasonable care, the Bank as Custodian and Agent shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall
be liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is
intended to nor shall it be construed to modify the standards of care and
responsibility set forth in Section 2 hereof with respect to subcustodians
and in subparagraph f of Paragraph L of Section 3 hereof with respect to
Securities Systems and in subparagraph g of Paragraph M of Section 3
hereof with respect to an Approved Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a
foreign banking institution to the same extent as set forth with respect
to subcustodians generally in Section 2 hereof, provided that, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank,
the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Trust to maintain custody of any securities or cash
of the Trust in a foreign country including, but not limited to, losses
resulting from nationalization, expropriation, currency restrictions, acts
of war, civil war or terrorism, insurrection, revolution, military or
usurped powers, nuclear fission, fusion or radiation, earthquake, storm or
other disturbance of nature or acts of God.
If the Trust requires the Bank in any capacity to take any action
with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Bank, result in the Bank or its
nominee assigned to the Trust being liable for the payment of money or
incurring liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
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9. Persons Having Access to Assets of the Trust
(i) No trustee, officer, employee, or agent of the Trust shall
have physical access to the assets of the Trust held by the Custodian or
be authorized or permitted to withdraw any investments of the Trust, nor
shall the Custodian deliver any assets of the Trust to any such person.
No officer or director, employee or agent of the Custodian who holds any
similar position with the Trust or the investment adviser or the
administrator of the Trust shall have access to the assets of the Trust.
(ii) Access to assets of the Trust held hereunder shall only be
available to duly authorized officers, employees, representatives or
agents of the Custodian or other persons or entities for whose actions the
Custodian shall be responsible to the extent permitted hereunder, or to
the Trust's independent public accountants in connection with their
auditing duties performed on behalf of the Trust.
(iii) Nothing in this Section 9 shall prohibit any officer,
employee or agent of the Trust or of the investment adviser of the Trust
from giving instructions to the Custodian or executing a certificate so
long as it does not result in delivery of or access to assets of the Trust
prohibited by paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor
Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination
to take effect not sooner than sixty (60) days after the date of such
delivery or mailing; provided, that the Trust may at any time by action of
its Board, (i) substitute another bank or trust company for the Custodian
by giving notice as described above to the Custodian, or
(ii) immediately terminate this Agreement in the event of the appointment
of a conservator or receiver for the Custodian by the Federal Deposit
Insurance Corporation or by the Banking Commissioner of The Commonwealth
of Massachusetts or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction. Upon
termination of the Agreement, the Trust shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and
disbursements.
Unless the holders of a majority of the outstanding "voting
securities" of the Trust (as defined in the Investment Company Act of
1940) vote to have the securities, funds and other properties held
hereunder delivered and paid over to some other bank or trust company,
specified in the vote, having not less than $2,000,000 of aggregate
capital, surplus and undivided profits, as shown by its last published
report, and meeting such other qualifications for custodians set forth in
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the Investment Company Act of 1940, the Board shall, forthwith, upon
giving or receiving notice of termination of this Agreement, appoint as
successor custodian, a bank or trust company having such qualifications.
The Bank, as Custodian, Agent or otherwise, shall, upon termination of the
Agreement, deliver to such successor custodian, all securities then held
hereunder and all funds or other properties of the Trust deposited with or
held by the Bank hereunder and all books of account and records kept by
the Bank pursuant to this Agreement, and all documents held by the Bank
relative thereto. In the event that no such vote has been adopted by the
Holders of Interest in the Trust and that no written order designating a
successor custodian shall have been delivered to the Bank on or before the
date when such termination shall become effective, then the Bank shall not
deliver the securities, funds and other properties of the Trust to the
Trust but shall have the right to deliver to a bank or trust company doing
business in Boston, Massachusetts of its own selection, having an
aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than $2,000,000, all funds, securities and
properties of the Trust held by or deposited with the Bank, and all books
of account and records kept by the Bank pursuant to this Agreement, and
all documents held by the Bank relative thereto. Thereafter such bank or
trust company shall be the successor of the Custodian under this
Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian
and the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this Agreement. Any
such interpretive or additional provisions shall be in a writing signed by
both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the governing instruments
of the Trust. No interpretive or additional provisions made as provided
in the preceding sentence shall be deemed to be an amendment of this
Agreement.
12. Notices
Notices and other writings delivered or mailed postage prepaid to
the Trust addressed to 24 Federal Street, Boston, MA 02110 or to such
other address as the Trust may have designated to the Bank, in writing
with a copy to Eaton Vance Management at 24 Federal Street, Boston,
Massachusetts 02110, or to Investors Bank & Trust Company, 24 Federal
Street, Boston, Massachusetts 02110 with a copy to Eaton Vance Management
at 24 Federal Street, Boston, Massachusetts 02110, shall be deemed to have
been properly delivered or given hereunder to the respective addressees.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
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Massachusetts.
The Custodian expressly acknowledges the provision in the
Declaration of Trust of the Trust (Section 5.2 and 5.6) limiting the
personal liability of the Trustees and officers of the Trust, and the
Custodian hereby agrees that it shall have recourse to the Trust for
payment of claims or obligations as between the Trust and the Custodian
arising out of this Agreement, and the Custodian shall not seek
satisfaction from any Trustee or officer of the Trust.
14. Adoption of the Agreement by the Trust
The Trust represents that its Board has approved this Agreement
and has duly authorized the Trust to adopt this Agreement, such adoption
to be evidenced by a letter agreement between the Trust and the Bank
reflecting such adoption, which letter agreement shall be dated and signed
by a duly authorized officer of the Trust and duly authorized officer of
the Bank. This Agreement shall be deemed to be duly executed and
delivered by each of the parties in its name and behalf by its duly
authorized officer as of the date of such letter agreement, and this
Agreement shall be deemed to supersede and terminate, as of the date of
such letter agreement, all prior agreements between the Trust and the Bank
relating to the custody of the Trust's assets.
* * * * *
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SHORT-TERM GLOBAL INCOME PORTFOLIO
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
May 1, 1992
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TABLE OF CONTENTS
PAGE
ARTICLE I--Introduction . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II--Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III--Capital Accounts
Section 3.1 Capital Accounts of Holders . . . . 4
Section 3.2 Book Capital Accounts . . . . . . . 4
Section 3.3 Tax Capital Accounts . . . . . . . . 4
Section 3.4 Compliance with Treasury Regulations 5
ARTICLE IV--Distributions of Cash and Assets
Section 4.1 Distributions of Distributable Cash 5
Section 4.2 Division Among Holders . . . . . . . 5
Section 4.3 Distributions Upon Liquidation of a
Holder's Interest in the Trust . . . 5
Section 4.4 Amounts Withheld . . . . . . . . . . 5
ARTICLE V--Allocations
Section 5.1 Allocation of Items to Book Capital
Accounts . . . . . . . . . . . . . . 6
Section 5.2 Allocation of Taxable Income and Tax
Loss to Tax Capital Accounts . . . . 6
Section 5.3 Special Allocations to Book and Tax
Capital Accounts . . . . . . . . . . 7
Section 5.4 Other Adjustments to Book and Tax
Capital Accounts . . . . . . . . . . 7
Section 5.5 Timing of Tax Allocations to Book and
Tax Capital Accounts . . . . . . . . 7
Section 5.6 Redemptions During the Fiscal Year . 8
ARTICLE VI--Withdrawals
Section 6.1 Partial Withdrawals . . . . . . . . 8
Section 6.2 Redemptions . . . . . . . . . . . . 8
Section 6.3 Distribution in Kind . . . . . . . . 8
ARTICLE VII--Liquidation
Section 7.1 Liquidation Procedure . . . . . . . 8
Section 7.2 Alternative Liquidation Procedure . 9
Section 7.3 Cash Distributions Upon Liquidation 9
Section 7.4 Treatment of Negative Book Capital
Account Balance . . . . . . . . . . 9
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PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
SHORT-TERM GLOBAL INCOME PORTFOLIO
(the "Trust")
------------------------
ARTICLE I
Introduction
The Trust is treated as a partnership for federal income tax
purposes. These procedures have been adopted by the Trustees of the Trust
and will be furnished to the Trust's accountants for the purpose of
allocating Trust gains, income or loss and distributing Trust assets. The
Trust will maintain its books and records, for both book and tax purposes,
using the accrual method of accounting.
ARTICLE II
Definitions
Except as otherwise provided herein, a term referred to herein
shall have the same meaning as that ascribed to it in the Declaration.
References in this document to "hereof", "herein" and "hereunder" shall be
deemed to refer to this document in its entirety rather than the article
or section in which any such word appears.
"Book Capital Account" shall mean, for any Holder at any time in
any Fiscal Year, the Book Capital Account balance of the Holder on the
first day of the Fiscal Year, as adjusted each day pursuant to the
provisions of Section 3.2 hereof.
"Capital Contribution" shall mean, with respect to any Holder,
the amount of money and the Fair Market Value of any assets actually
contributed from time to time to the Trust with respect to the Interest
held by such Holder.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended from time to time, as well as any non-superseded provisions of the
Internal Revenue Code of 1954, as amended (or any corresponding provision
or provisions of succeeding law).
"Declaration" shall mean the Trust's Declaration of Trust, dated
May l, 1992, as amended from time to time.
"Designated Expenses" shall mean extraordinary Trust expenses
attributable to a particular Holder that are to be borne by such Holder.
"Distributable Cash" for any Fiscal Year shall mean the gross
cash proceeds from Trust activities, less the portion thereof used to pay
or establish Reserves, plus such portion of the Reserves as the Trustees,
<PAGE>
in their sole discretion, no longer deem necessary to be held as Reserves.
Distributable Cash shall not be reduced by depreciation, amortization,
cost recovery deductions, or similar allowances.
"Fair Market Value" of a security, instrument or other asset on
any particular day shall mean the fair value thereof as determined in good
faith by or on behalf of the Trustees in the manner set forth in the
Registration Statement.
"Fiscal Year" shall mean an annual period determined by the
Trustees which ends on such day as is permitted by the Code.
"Holders" shall mean as of any particular time all holders of
record of Interests in the Trust.
"Interest(s)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by the
Declaration, which interest may be expressed as a percentage, determined
by calculating, at such times and on such bases as the Trustees shall from
time to time determine, the ratio of each Holder's Book Capital Account
balance to the total of all Holders' Book Capital Account balances.
"Investments" shall mean all securities, instruments or other
assets of the Trust of any nature whatsoever, including, but not limited
to, all equity and debt securities, futures contracts, and all property of
the Trust obtained by virtue of holding such assets.
"Matched Income or Loss" shall mean Taxable Income, Tax-Exempt
Income or Tax Loss of the Trust comprising interest, original issue
discount and dividends and all other types of income or loss to the extent
the Taxable Income, Tax-Exempt Income, Tax Loss or Loss items not included
in Tax Loss arising from such items are recognized for tax purposes at the
same time that Profit or Loss are accrued for book purposes by the Trust.
"Net Unrealized Gain" shall mean the excess, if any, of the
aggregate Fair Market Value of all Investments over the aggregate adjusted
bases, for federal income tax purposes, of all Investments.
"Net Unrealized Loss" shall mean the excess, if any, of the
aggregate adjusted bases, for federal income tax purposes, of all
Investments over the aggregate Fair Market Value of all Investments.
"Profit" and "Loss" shall mean, for each Fiscal Year or other
period, an amount equal to the Taxable Income or Tax Loss for such Fiscal
Year or period with the following adjustments:
(i) Any Tax-Exempt Income shall be added to such
Taxable Income or subtracted from such Tax Loss; and
(ii) Any expenditures of the Trust for such
year or period described in Section 705(a)(2)(B) of the
Code or treated as expenditures under
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Section 705(a)(2)(B) of the Code pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profit or Loss
or specially allocated shall be subtracted from such
Taxable Income or added to such Tax Loss.
"Redemption" shall mean the complete withdrawal of an Interest of
a Holder the result of which is to reduce the Book Capital Account balance
of that Holder to zero.
"Registration Statement" shall mean the Registration Statement of
the Trust on Form N-1A as filed with the U.S. Securities and Exchange
Commission under the 1940 Act, as the same may be amended from time to
time.
"Reserves" shall mean, with respect to any Fiscal Year, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the Trustees for working
capital and to pay taxes, insurance, debt service, renewals, or other
costs or expenses, incident to the ownership of the Investments or to its
operations.
"Tax Capital Account" shall mean, for any Holder at any time in
any Fiscal Year, the Tax Capital Account balance of the Holder on the
first day of the Fiscal Year, as adjusted each day pursuant to the
provisions of Section 3.3 hereof.
"Tax-Exempt Income" shall mean income of the Trust for such
Fiscal Year or period that is exempt from federal income tax and not
otherwise taken into account in computing Profit or Loss.
"Tax Lot" shall mean securities or other property which are both
purchased or acquired, and sold or otherwise disposed of, as a unit.
"Taxable Income" or "Tax Loss" shall mean the taxable income or
tax loss of the Trust, determined in accordance with Section 703(a) of the
Code, for each Fiscal Year as determined for federal income tax purposes,
together with each of the Trust's items of income, gain, loss or deduction
which is separately stated or otherwise not included in computing taxable
income and tax loss.
"Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).
"Trust" shall mean Short-Term Global Income Portfolio, a trust
fund formed under the law of the State of New York by the Declaration.
"Trustees" shall mean each signatory to the Declaration, so long
as such signatory shall continue in office in accordance with the terms
thereof, and all other individuals who at the time in question have been
duly elected or appointed and have qualified as Trustees in accordance
-3-
<PAGE>
with the provisions thereof and are then in office.
The "1940 Act" shall mean the U.S. Investment Company Act of
1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE III
Capital Accounts
3.1. Capital Accounts of Holders. A separate Book Capital
Account and a separate Tax Capital Account shall be maintained for each
Holder pursuant to Section 3.2 and Section 3.3. hereof, respectively. In
the event the Trustees shall determine that it is prudent to modify the
manner in which the Book Capital Accounts or Tax Capital Accounts, or any
debits or credits thereto, are computed in order to comply with the
Treasury Regulations, the Trustees may make such modification, provided
that it is not likely to have a material effect on the amounts
distributable to any Holder pursuant to Article VII hereof upon the
dissolution of the Trust.
3.2. Book Capital Accounts. The Book Capital Account balance of
each Holder shall be adjusted each day by the following amounts:
(a) increased by any increase in Net Unrealized Gains or decrease
in Net Unrealized Losses allocated to such Holder pursuant to
Section 5.1(a) hereof;
(b) decreased by any decrease in Net Unrealized Gains or increase
in Net Unrealized Losses allocated to such Holder pursuant to
Section 5.1(b) hereof;
(c) increased or decreased, as the case may be, by the amount of
Profit or Loss, respectively, allocated to such Holder pursuant to
Section 5.1(c) hereof;
(d) increased by any Capital Contribution made by such Holder;
and,
(e) decreased by any distribution, including any distribution to
effect a withdrawal or Redemption, made to such Holder by the Trust.
Any adjustment pursuant to Section 3.2 (a), (b) or (c) above
shall be prorated for increases in each Holder's Book Capital Account
balance resulting from Capital Contributions, or distributions or
withdrawals from the Trust or Redemptions by the Trust occurring, during
such Fiscal Year as of the day after the Capital Contribution,
distribution, withdrawal or Redemption is accepted, made or effected by
-4-
<PAGE>
the Trust.
3.3. Tax Capital Accounts. The Tax Capital Account balance of
each Holder shall be adjusted at the following times by the following
amounts:
(a) increased daily by the adjusted tax bases of any Capital
Contribution made by such Holder to the Trust;
(b) increased daily by the amount of Taxable Income and Tax-
Exempt Income allocated to such Holder pursuant to Section 5.2 hereof at
such times as the allocations are made under Section 5.2 hereof;
(c) decreased daily by the amount of cash distributed to the
Holder pursuant to any of these procedures including any distribution made
to effect a withdrawal or Redemption; and
(d) decreased by the amount of Tax Loss allocated to such Holder
pursuant to Section 5.2 hereof at such times as the allocations are made
under Section 5.2 hereof.
3.4. Compliance with Treasury Regulations. The foregoing
provisions and other provisions contained herein relating to the
maintenance of Book Capital Accounts and Tax Capital Accounts are intended
to comply with Treasury Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Treasury
Regulations.
The Trustees shall make any appropriate modifications in the
event unanticipated events might otherwise cause these procedures not to
comply with Treasury Regulations Section 1.704-1(b), including the
requirements described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(b)(1) and Treasury Regulations Section 1.704-1(b)(2)(iv).
Such modifications are hereby incorporated into these procedures by this
reference as though fully set forth herein.
ARTICLE IV
Distributions of Cash and Assets
4.1. Distributions of Distributable Cash. Except as otherwise
provided in Article VII hereof, Distributable Cash for each Fiscal Year
may be distributed to the Holders at such times, if any, and in such
amounts as shall be determined in the sole discretion of the Trustees. In
exercising such discretion, the Trustees shall distribute such
Distributable Cash so that Holders that are regulated investment companies
can comply with the distribution requirements set forth in Code
Section 852 and avoid the excise tax imposed by Code Section 4982.
4.2. Division Among Holders. All distributions to the Holders
with respect to any Fiscal Year pursuant to Section 4.1 hereof shall be
made to the Holders in proportion to the Taxable Income, Tax-Exempt Income
-5-
<PAGE>
or Tax Loss allocated to the Holders with respect to such Fiscal Year
pursuant to the terms of these procedures.
4.3. Distributions Upon Liquidation of a Holder's Interest in
the Trust. Upon liquidation of a Holder's interest in the Trust, the
proceeds will be distributed to the Holder as provided in Section 5.6,
Article VI, and Article VII hereof. If such Holder has a negative book
capital account balance, the provisions of Section 7.4 will apply.
4.4. Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any
payment or distribution to the Trust or the Holders shall be treated as
amounts distributed to such Holders pursuant to this Article IV for all
purposes under these procedures. The Trustees may allocate any such
amount among the Holders in any manner that is in accordance with
applicable law.
ARTICLE V
Allocations
5.1. Allocation of Items to Book Capital Accounts.
(a) Increase in Net Unrealized Gains or Decrease in Net
Unrealized Losses. Any decrease in Net Unrealized Loss due to realization
of items shall be allocated to the Holder receiving the allocation of
Loss, in the same amount, under Section 5.1(c) hereof. Subject to Section
5.1(d) hereof, any increase in Net Unrealized Gains or decrease in Net
Unrealized Loss on any day during the Fiscal Year shall be allocated to
the Holders' Book Capital Accounts at the end of such day, in proportion
to the Holders' respective Book Capital Account balances at the
commencement of such day.
(b) Decrease in Net Unrealized Gains or Increase in Net
Unrealized Losses. Any decrease in Net Unrealized Gains due to
realization of items shall be allocated to the Holder receiving the
allocation of Profit, in the same amount, under Section 5.1(c) hereof.
Subject to Section 5.1(d) hereof, any decrease in Net Unrealized Gains or
increase in Net Unrealized Loss on any day during the Fiscal Year shall be
allocated to the Holders' Book Capital Accounts at the end of such day, in
proportion to the Holders' respective Book Capital Account balances at the
commencement of such day.
(c) Profit and Loss. Subject to Section 5.1(d) hereof, Profit
and Loss occurring on any day during the Fiscal Year shall be allocated to
the Holders' Book Capital Accounts at the end of such day in proportion to
the Holders' respective Book Capital Account balances at the commencement
of such day.
(d) Other Book Capital Account Adjustments.
(i) Any allocation pursuant to Section 5.1(a), (b)
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<PAGE>
or (c) above shall be prorated for increases in each
Holder's Book Capital Account resulting from Capital
Contributions, or distributions or withdrawals from the
Trust or Redemptions by the Trust occurring, during such
Fiscal Year as of the day after the Capital Contribution,
distribution, withdrawal or Redemption is accepted, made
or effected by the Trust.
(ii) For purposes of determining the Profit, Loss,
and Net Unrealized Gain or Net Unrealized Loss or any
other item allocable to any Fiscal Year, Profit, Loss,
and Net Unrealized Gain or Net Unrealized Loss and any
such other item shall be determined by or on behalf of
the Trustees using any reasonable method under Code
Section 706 and the Treasury Regulations thereunder.
5.2. Allocation of Taxable Income and Tax Loss to Tax Capital
Accounts.
(a) Taxable Income and Tax Loss. Subject to Section 5.2(b) and
Section 5.3 hereof, which shall take precedence over this Section 5.2(a),
Taxable Income or Tax Loss for any Fiscal Year shall be allocated at least
annually to the Holders' Tax Capital Accounts as follows:
(i) First, Taxable Income and Tax Loss, whether
constituting ordinary income (or loss) or capital gain
(or loss), derived from the sale or other disposition of
a Tax Lot of securities or other property shall be
allocated as of the date such income, gain or loss is
recognized for federal income tax purposes solely in
proportion to the amount of unrealized appreciation (in
the case of such income or capital gain, but not in the
case of any such loss) or depreciation (in the case of
any such loss, but not in the case of any such income or
capital gain) from that Tax Lot which was allocated to
the Holders' Book Capital Accounts each day that such
securities or other property was held by the Trust
pursuant to Section 5.1(a) and (b) hereof; and
(ii) Second, any remaining amounts at the end
of the Fiscal Year, to the Holders in proportion to their
respective daily average Book Capital Account balances
determined for the Fiscal Year of the allocation.
(b) Matched Income or Loss. Notwithstanding the provisions of
Section 5.2(a) hereof, Taxable Income, Tax-Exempt Income or Tax Loss
accruing on any day during the Fiscal Year constituting Matched Income or
Loss, shall be allocated daily to the Holders' Tax Capital Accounts solely
in proportion to and to the extent of corresponding allocations of Profit
or Loss to the Holders' Book Capital Accounts pursuant to the first
sentence of Section 5.1(c) hereof.
-7-
<PAGE>
5.3. Special Allocations to Book and Tax Capital Accounts.
(a) The Designated Expenses computed for each Holder shall be
allocated separately (not included in the allocations of Matched Income or
Loss, Loss or Tax Loss) to the Book Capital Account and Tax Capital
Account of each Holder.
(b) If the Trust incurs any nonrecourse indebtedness, then
allocations of items attributable to nonrecourse indebtedness shall be
made to the Tax Capital Account of each Holder in accordance with the
requirements of Treasury Regulations Section 1.704-1(b)(4)(iv)(d).
(c) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, Taxable Income and Tax Loss with respect to any
property contributed to the capital of the Trust shall be allocated to the
Tax Capital Account of each Holder so as to take into account any
variation between the adjusted tax basis of such property to the Trust for
federal income tax purposes and such property's Fair Market Value at the
time of contribution to the Trust.
5.4. Other Adjustments to Book and Tax Capital Accounts.
(a) Any election or other decision relating to such allocations
shall be made by the Trustees in any manner that reasonably reflects the
purpose and intention of these procedures.
(b) Each Holder will report its share of Trust income and loss
for federal income tax purposes in accordance with the allocations
effected pursuant to Section 5.2 hereof.
5.5. Timing of Tax Allocations to Book and Tax Capital Accounts.
Allocation of Taxable Income, Tax-Exempt Income and Tax Loss pursuant to
Section 5.2 hereof for any Fiscal Year, unless specified above to the
contrary, shall be made only after corresponding adjustments have been
made to the Book Capital Accounts of the Holders for the Fiscal Year as
provided pursuant to Section 5.1 hereof.
5.6. Redemptions During the Fiscal Year. If a Redemption occurs
prior to the end of a Fiscal Year, the Trust will treat the Fiscal Year as
ended for the purposes of computing the redeeming Holder's distributive
share of Trust items and allocations of all items to such Holder will be
made as though each Holder were receiving its allocable share of Trust
items at such time. All items so allocated to the redeeming Holder will
be subtracted from the items to be allocated among the other non-redeeming
Holders at the actual end of the Fiscal Year. All items allocated among
the redeeming and non-redeeming Holders will be made subject to the rules
of Code Sections 702, 704, 706 and 708 and the Treasury Regulations
promulgated thereunder.
ARTICLE VI
Withdrawals
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<PAGE>
6.1. Partial Withdrawals. At any time any Holder shall be
entitled to request a withdrawal of such portion of the Interest held by
such Holder as such Holder shall request.
6.2. Redemptions. At any time a Holder shall be entitled to
request a Redemption of all of its Interest. A Holder's Interest may be
redeemed at any time during the Fiscal Year as provided in Section 6.3
hereof by a cash distribution or, at the option of a Holder, by a
distribution of a proportionate amount except for fractional shares of
each Trust asset at the option of the Trust. However, the Holder may be
redeemed by a distribution of a proportionate amount of the Trust's assets
only at the end of a Fiscal Year. However, if the Holder has contributed
any property to the Trust other than cash, if such property remains in the
Trust at the time the Holder requests withdrawal, then such property will
be sold by the Trust prior to the time at which the Holder withdraws from
the Trust.
6.3. Distribution in Kind. If a withdrawing Holder receives a
distribution in kind of its proportionate part of Trust property, then
unrealized income, gain, loss or deduction attributable to such property
shall be allocated among the Holders as if there had been a disposition of
the property on the date of distribution in compliance with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(iv)(e).
ARTICLE VII
Liquidation
7.1. Liquidation Procedure. Subject to Section 7.4 hereof, upon
dissolution of the Trust, the Trustees shall liquidate the assets of the
Trust, apply and distribute the proceeds thereof as follows:
(a) first to the payment of all debts and obligations of the
Trust to third parties, including without limitation the retirement of
outstanding debt, including any debt owed to Holders or their affiliates,
and the expenses of liquidation, and to the setting up of any Reserves for
contingencies which may be necessary; and
(b) then in accordance with the Holders' positive Book Capital
Account balances after adjusting Book Capital Accounts for allocations
provided in Article V hereof and in accordance with the requirements
described in Treasury Regulations Section 1.704-1(b)(2) (ii)(b)(2).
7.2. Alternative Liquidation Procedure. Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the Trust assets would cause undue loss to the Holders, the
Trustees, in order to avoid such loss, may, after having given
notification to all the Holders, to the extent not then prohibited by the
law of any jurisdiction in which the Trust is then formed or qualified and
applicable in the circumstances, either defer liquidation of and withhold
from distribution for a reasonable time any assets of the Trust except
those necessary to satisfy the Trust's debts and obligations or distribute
-9-
<PAGE>
the Trust's assets to the Holders in liquidation.
7.3. Cash Distributions Upon Liquidation. Except as provided in
Section 7.2 hereof, amounts distributed in liquidation of the Trust shall
be paid solely in cash.
7.4. Treatment of Negative Book Capital Account Balance. If a
Holder has a negative balance in its Book Capital Account following the
liquidation of its Interest, as determined after taking into account all
capital account adjustments for the Fiscal Year during which the
liquidation occurs, then such Holder shall restore the amount of such
negative balance to the Trust by the later of the end of the Fiscal Year
or 90 days after the date of such liquidation so as to comply with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3).
Such amount shall, upon liquidation, be paid to creditors of the Trust or
distributed to other Holders in accordance with their positive Book
Capital Account balances.
-10-
<PAGE>
AMENDMENT TO
MASTER CUSTODIAN AGREEMENT
between
EATON VANCE HUB PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
This Amendment, dated as of October 23, 1995, is made to the
MASTER CUSTODIAN AGREEMENT (the "Agreement") between each investment
company advised by Boston Management and Research which has adopted the
Agreement (the "Trusts") and Investors Bank & Trust Company (the
"Custodian") pursuant to Section 10 of the Agreement.
The Trusts and the Custodian agree that Section 10 of the
Agreement shall, as of October 23, 1995, be amended to read as follows:
Unless otherwise defined herein, terms which are defined in the
Agreement and used herein are so used as so defined.
10. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT; SUCCESSOR CUSTODIAN
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated by either party after
August 31, 2000 by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; PROVIDED,
that the Trust may at any time by action of its Board, (i) substitute
another bank or trust company for the Custodian by giving notice as
described above to the Custodian in the event the Custodian assigns this
Agreement to another party without consent of the noninterested Trustees
of the Trust, or (ii) immediately terminate this Agreement in the event of
the appointment of a conservator or receiver for the Custodian by the
Federal Deposit Insurance Corporation or by the Banking Commissioner of
The Commonwealth of Massachusetts or upon the happening of a like event at
the direction of an appropriate regulatory agency or court of competent
jurisdiction. Upon termination of the Agreement, the Trust shall pay to
the Custodian such compensation as may be due as of the date of such
termination (and shall likewise reimburse the Custodian for its costs,
expenses and disbursements).
This Agreement may be amended at any time by the written
agreement of the parties hereto. If a majority of the non-interested
trustees of any of the Trusts determines that the performance of the
Custodian has been unsatisfactory or adverse to the interests of Trust
holders of any Trust or Trusts or that the terms of the Agreement are no
longer consistent with publicly available industry standards, then the
Trust or Trusts shall give written notice to the Custodian of such
determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non-interested trustees of
the Trusts. If the conditions of the preceding sentence are not met then
the Trust or Trusts may terminate this Agreement on sixty (60) days
written notice.
<PAGE>
The Board of the Trust shall, forthwith, upon giving or receiving
notice of termination of this Agreement, appoint as successor custodian, a
bank or trust company having the qualifications required by the Investment
Company Act of 1940 and the Rules thereunder. The Bank, as Custodian,
Agent or otherwise, shall, upon termination of the Agreement, deliver to
such successor custodian, all securities then held hereunder and all funds
or other properties of the Trust deposited with or held by the Bank
hereunder and all books of account and records kept by the Bank pursuant
to this Agreement, and all documents held by the Bank relative thereto.
In the event that no written order designating a successor custodian shall
have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Trust to the Trust but shall
have the right to deliver to a bank or trust company doing business in
Boston, Massachusetts of its own selection meeting the above required
qualifications, all funds, securities and properties of the Trust held by
or deposited with the Bank, and all books of account and records kept by
the Bank pursuant to this Agreement, and all documents held by the Bank
relative thereto. Thereafter such bank or trust company shall be the
successor of the Custodian under this Agreement.
Except as expressly provided herein, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized officers, as of the day and year
first above written.
Alabama Tax Free Portfolio
Arizona Tax Free Portfolio
Arkansas Tax Free Portfolio
Cash Management Portfolio
Colorado Tax Free Portfolio
Connecticut Tax Free Portfolio
Florida Insured Tax Free Portfolio
Florida Tax Free Portfolio
Georgia Tax Free Portfolio
Government Obligations Portfolio
Growth Portfolio
Hawaii Tax Free Portfolio
High Yield Municipals Portfolio
Investors Portfolio
Kansas Tax Free Portfolio
Kentucky Tax Free Portfolio
Louisiana Tax Free Portfolio
Maryland Tax Free Portfolio
Massachusetts Tax Free Portfolio
Michigan Tax Free Portfolio
Minnesota Tax Free Portfolio
Mississippi Tax Free Portfolio
Missouri Tax Free Portfolio
National Municipals Portfolio
New Jersey Tax Free Portfolio
New York Tax Free Portfolio
<PAGE>
North Carolina Tax Free Portfolio
Ohio Tax Free Portfolio
Oregon Tax Free Portfolio
Pennsylvania Tax Free Portfolio
Rhode Island Tax Free Portfolio
South Carolina Tax Free Portfolio
Special Investment Portfolio
Stock Portfolio
Strategic Income Portfolio
Tax Free Reserves Portfolio
Tennessee Tax Free Portfolio
Texas Tax Free Portfolio
Total Return Portfolio
Virginia Tax Free Portfolio
West Virginia Tax Free Portfolio
Arizona Limited Maturity Tax Free Portfolio
California Tax Free Portfolio
California Limited Maturity Tax Free Portfolio
Connecticut Limited Maturity Tax Free Portfolio
Florida Limited Maturity Tax Free Portfolio
Massachusetts Limited Maturity Tax Free Portfolio
Michigan Limited Maturity Tax Free Portfolio
National Limited Maturity Tax Free Portfolio
New Jersey Limited Maturity Tax Free Portfolio
New York Limited Maturity Tax Free Portfolio
North Carolina Limited Maturity Tax Free Portfolio
Ohio Limited Maturity Tax Free Portfolio
Pennsylvania Limited Maturity Tax Free Portfolio
Virginia Limited Maturity Tax Free Portfolio
By: /s/James L. O'Connor
------------------------------
James L. O'Connor
Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/Michael F. Rogers
------------------------------
Michael F. Rogers
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918706
<NAME> STRATEGIC INCOME PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 140,187
<INVESTMENTS-AT-VALUE> 147,243
<RECEIVABLES> 5,966
<ASSETS-OTHER> 1,916
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 155,125
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<OTHER-ITEMS-LIABILITIES> 2,542
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<SENIOR-EQUITY> 0
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<NET-ASSETS> 152,583
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,757
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<EXPENSES-NET> 1,529
<NET-INVESTMENT-INCOME> 16,228
<REALIZED-GAINS-CURRENT> (11,683)
<APPREC-INCREASE-CURRENT> 15,738
<NET-CHANGE-FROM-OPS> 20,283
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (83,885)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,529
<AVERAGE-NET-ASSETS> 182,133
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
